Crude’s recent swings have been accompanied by a renewed liquidity malaise exacerbating market volatility. Open interest across the main futures contracts has fallen to the lowest since 2015 in recent days.
Over the past two weeks, oil has been rapidly giving up earlier gains in what’s been a volatile quarter as investors attempt to gauge the trajectory of the global economy and its impact on raw materials. There’s about a 50% chance the world economy will succumb to a recession, according to Citigroup Inc. and Deutsche Bank AG.
“Lots of focus is on recession fears,” said Hans Van Cleef, senior energy economist at ABN Amro. “Maybe the downward pressure we see now has been pushed too far” as traders switch from previously bullish positioning, he added.
There’s still little consensus among major banks on the outlook for oil. Goldman Sachs Group Inc. said in a note Tuesday that demand is still running ahead of supply, while warning that the Fed “cannot print commodities.” Citi sees crude dropping through this year and beyond.
So far, there’s only been limited relief in refined product markets — where bigger surges have occurred. Diesel futures in Europe closed Wednesday more than $57 a barrel higher than crude, a record in data since 2011.
A US industry snapshot pointed to higher inventories. The American Petroleum Institute reported crude holdings rose by 5.6 million barrels last week, while gasoline holdings also climbed, according to people familiar with the data. Official figures from the Energy Information Administration have been delayed.