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Investors remain concerned that restrictive US monetary policy could herald a recession, and oil has been dragged lower alongside other commodities. Two of the Federal Reserve’s most hawkish policy makers, Christopher Waller and James Bullard, backed raising interest rates by another 75 basis points this month to curb red-hot inflation, while also playing down concerns of a slump.
Still, physical signals remain robust, especially in the US. In addition, there may be interruptions to supplies. A key export route for Kazakh oil risks being suspended as it appeals a Russian court order for it to temporarily shut down.
Crude’s volatile trading means that it’s well down from last month’s high but still up more than 35% this year following Russia’s invasion of Ukraine. The complex market outlook has spurred banks to offer starkly different scenarios for prices, with Goldman Sachs Group Inc. remaining broadly bullish while Citigroup Inc. has said the commodity is at risk of a significant tumble.
“Concerns about recession have brought considerable pressure to bear on the prices of industrial commodities such as crude oil and copper of late,” said Carsten Fritsch an analyst at Commerzbank AG.
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In China, meanwhile, investors are tracking efforts by Beijing to buttress growth after anti-virus lockdowns hurt the economy and energy consumption in the first half. The Ministry of Finance may allow local governments to sell 1.5 trillion yuan ($220 billion) of special bonds for infrastructure funding.
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