Oil prices slide on uncertainty over global economic outlook, rate hikes

Oil prices fell on Monday as concerns about rising interest rates, the global economy and the outlook for fuel demand outweighed support from the prospect of tighter supplies on OPEC+ supply cuts, Trend reports with reference to Reuters.

Brent crude slipped 75 cents, or 0.92%, to $80.91 a barrel by 0409 GMT, while U.S. West Texas Intermediate crude was at $77.13 a barrel, down 74 cents, 0.95% lower.

Both contracts fell more than 5% last week, their first weekly drop in five, as U.S. implied gasoline demand fell from a year ago, fuelling worries of a recession at the world’s top oil consumer.

Weak U.S. economic data and disappointing corporate earnings from the tech sector sparked growth concerns and risk aversion among investors, CMC Markets analyst Tina Teng said. The stabilising U.S. dollar and climbing bond yields are also pressurising commodity markets, she added.

Central banks from the United States to Britain and Europe are all expected to raise interest rates when they meet in the first week of May, seeking to tackle stubbornly high inflation.

“I would cite recent mixed economic data and continued central bank intervention as the primary drivers behind the recent price correction,” said John Driscoll, director of JTD Energy Services. However, many may view this as a dip-buying opportunity, he said.

Still, refining margins in Asia have weakened on record production from top refiners of India, curbing the region’s appetite for Middle East supplies loading in June.

Nevertheless, analysts and traders remained bullish about fuel demand recovery towards the second half of 2023 and as additional supply cuts planned by OPEC+ – the Organization of the Petroleum Exporting Countries and allied producers- from May could tighten markets.

The oil demand recovery is expected to more than offset the slowdown in OECD demand in the near term, while sanctions and supply constraints add upside risk to prices, analysts at the National Australia Bank said, adding that Brent could rise to $92 a barrel by the end of the second quarter.