(Financial World) International oil prices plummeted 10%, the global economic recession alarm sounded?
China News Agency, Beijing, July 6 (Liu Wenwen) International oil prices have suffered another severe setback.
As of the close on the 5th, light sweet crude oil futures for August delivery on the New York Mercantile Exchange fell below the $100 mark to close at $99.50 a barrel; London Brent crude futures for September delivery fell $10.73 to close at $102.77 a barrel.
The largest intraday drop of the two oil prices was over 10%.
Why is the international oil price plummeting, and the industry winter is approaching?
Recession fears hang over markets
The slump in international oil prices is closely related to concerns about a global economic recession.
As inflation data continues to rise, the pressure on central banks to raise interest rates has doubled.
Since July, the Federal Reserve and the European Central Bank have repeatedly released hawkish signals, which has led to a sharp increase in investor panic about a recession in major economies.
On July 5, local time, the Bank of England warned that the outlook for the UK and global economy has "seriously deteriorated".
Energy and fuel costs are rising rapidly around the world, making the cost of living rise faster overall.
At the same time, energy tensions exacerbated market jitters.
According to reports, European gas prices have risen by around 700% since the beginning of 2021.
Global consumption of natural gas will shrink slightly this year before rising slowly over the next few years due to soaring prices and the prospect of further cuts in Russian gas supplies, the International Energy Agency's latest quarterly report on the gas market shows.
The British Center for Economics and Business Research recently released a report that the risk of a recession in Europe has risen sharply due to a reduction in Russian gas supplies, with a 40% chance of a recession in Europe this winter.
Affected by the above situation, the market's fear of economic recession has intensified, and the demand for safe-haven assets has contributed to the strengthening of the US dollar. The US dollar index rose to a new high in 20 years on the day.
The US dollar-denominated commodity prices have been under significant pressure due to rising purchase costs and less attractive investment.
Economic expectations are not optimistic
In fact, considering the impact of repeated epidemics and geopolitical tensions, the risk of recession in the global market has long appeared.
Since the beginning of this year, problems such as rising global inflation, falling real wages, energy crisis, and food shortages have continued to emerge.
To this end, the United Nations, the International Monetary Fund (IMF), the World Bank, and the OECD have all lowered their forecasts for global economic growth in their latest forecasts.
In addition, growth forecasts in several economies have also been reassessed.
The IMF has sharply lowered its forecast for U.S. economic growth in recent days.
The IMF said it now expects U.S. GDP to grow 2.9% in 2022, down from its April forecast of 3.7% growth.
The IMF also downgraded its 2023 U.S. economic growth forecast to 1.7 percent from 2.3 percent, and expects U.S. growth to be as low as 0.8 percent in 2024.
In addition to the United States, the euro zone, the United Kingdom, Japan, South Korea, Australia and Canada are also expected to fall into recession, according to a research report released by Nomura Holdings.
France lowered its 2022 GDP growth target to 2.5 percent, compared with a 4 percent growth forecast in the previous budget.
The German Institute for Macroeconomics and Economic Situation (IMK) lowered its forecast for German GDP growth in 2022 to 1.9% from 2.1% and 2023 from 3.2% to 2.6%.
When will international oil prices regain lost ground?
As investors panic about the global economic recession, international oil prices have frequently plunged recently.
After suffering multiple shocks, when will oil prices regain lost ground and make a comeback?
Jinlianchuang crude oil analyst Han Zhengji pointed out that with the increase in the macro-level economic recession and the increase in expectations of accelerating interest rate tightening and tightening liquidity, investors' bullish sentiment on the crude oil market has gradually subsided.
In the long run, if countries continue their current monetary tightening policies, funds for investment and speculation will continue to decrease. In addition, the slowdown in global economic growth will affect the growth of energy demand, and it will be inevitable for commodity prices to fall from high levels.
Taking light crude oil as an example, the mainstream price range in July may remain between $95 and $110 per barrel.
BofA Global Research said recently that the average Brent oil price is expected to be around $102 per barrel this year and next, while stressing that if European and American sanctions cause Russian oil production to fall below 9 million barrels per day, oil prices may surged to $150 a barrel.
Bank of America believes that even if there is a recession, the average Brent price in 2023 will exceed $75 per barrel; in addition, even if the downside risk of crude oil spot prices increases in the short term, sanctions on Russia will provide it with a "floor" effect.
Analysts believe that despite the current ups and downs in oil prices, the general trend of high-level operation is difficult to change.
At present, it is the peak season of global crude oil consumption, and demand will gradually rise; in the long run, the tight supply of crude oil will continue to intensify, and it is unlikely that the oil price will continue to plummet. It is expected to regain lost ground without waiting for a long time.
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