Oil prices retreat on COVID concerns and recession fears in China

Oil futures fell on Monday as Beijing tried to stem a renewed spike in COVID-19 cases, and global stocks tumbled as the shockwaves from last week’s hotter-than-expected US CPI continued to tide through financial markets.

price action
  • West Texas Intermediate crude for July delivery CL.1,
    -1.70%

    CL00,
    -1.70%

    CLN22,
    -1.70%
    fell $1.89, or 1.6%, to $118.78 a barrel on the New York Mercantile Exchange.

  • August Brent Crude Oil BRN00,
    -1.55%

    BRNQ22,
    -1.55%,
    the global benchmark, ICE Futures Europe fell $1.64, or 1.3%, to $120.33 a barrel. WTI and Brent hit three-month highs last week.

  • Back on Nymex, July Gasoline RBN22,
    -2.33%
    Plunged 2.2% to $4.0821 a gallon, continuing a pullback from last week’s all-time highs, while heating oil HON22 in July
    -1.18%
    declined 0.8% to $4.3297 a gallon.

  • July natural gas futures NGN22,
    -2.12%
    down 2.5% to $8.63 per million British heat units.

market leader

Beijing relocated to step up testing after a COVID-19 outbreak linked to a nightclub. The outbreak has infected at least 183 people in 15 districts, according to news reports.

“Therefore, hopes that oil demand will return to normal quickly and fully after earlier lockdowns in China, the world’s second-largest oil consumer, were lifted have proved premature,” said Carsten Fritsch, a commodities analyst at Commerzbank, in a statement.

Meanwhile, US stocks looked set for another heavy-loss session as global stock selling continued after Friday’s CPI showed inflation hit a 40-year high of 8 in May. 6% compared to the previous year.

“Should the Fed respond by raising interest rates significantly more and the US economy slide into recession, this would also affect oil demand in the world’s largest oil consumer country,” said Fritsch, referring to the plans outlined by the European at the beginning of the The central bank’s rate hike last week fueled fears of a recession in the eurozone.

A renewed appreciation in the US dollar on expectations that the US Federal Reserve will ramp up its aggressive monetary tightening effort has also been a headwind for crude oil and other commodities traded in the unit. A stronger dollar makes them more expensive for users of other currencies.

The ICE US Dollar Index DXY,
+0.58%,
a measure of the currency against a basket of six major peers, rose 0.6%.

https://www.marketwatch.com/story/oil-prices-pull-back-on-china-covid-worries-recession-fears-11655120148?rss=1&siteid=rss Oil prices retreat on COVID concerns and recession fears in China

Brian Lowry

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