Oil prices fell more than 5% due to recession fears

(Photo by JOE RADLE/GETTY IMAGES NORTH AMERICA/Getty Images via AFP)

HONG KONG, JUNE 22, 2022 (AFP). Oil prices tumbled more than 5% on Wednesday as traders grow more worried that demand for commodities will be hit by a possible recession triggered by a sharp hike in interest rates aimed at curbing inflation.

West Texas Intermediate oil lost 5.6% to $103.31 a barrel, while Brent oil fell 5.2% to $108.62.

Oil has skyrocketed in recent months to multi-year highs on fears that limited supplies caused by the war in Ukraine will not be enough to meet demand as the world economy reopens, especially China, which is emerging from a months-long lockdown.

But central banks have been forced to raise borrowing costs as rising energy prices helped drive inflation to levels not seen since the 1980s. This added to fears that economies around the world are heading into recession, sending chills in crude oil markets.

Attention is on the two-day congressional testimony of Federal Reserve Chairman Jerome Powell this week, which will be scrutinized for ideas about officials’ plans to combat runaway prices.

However, Goldman Sachs said it still believes black gold prices will pick up again.

“As demand for commodities exceeds supply, markets remain tight even as growth slows,” it said.

“Investors should remember that the Fed-driven slowdown is just a short-term easing of the inflation symptom, not a cure for the underinvestment problem.”

dan / ICC

© Agence France-Presse