Oil prices dip on global economic concerns

Oil prices dipped on Monday on increased economic concerns and WTI price dropped to $75.2 per barrel. If the WTI price declines, it may encounter support near $74 per barrel, while resistance may be found near $79.2 per barrel.

Oil prices fell on Monday as global economic concerns outweighed support from new OPEC+ supply cuts. OPEC+ producers recently decided to reduce output by 1.1 million barrels per day, to offset the drop in oil prices from the global banking crisis. Global economic concerns are weighing oil prices down, however. 

As recession concerns mount, the potential of a banking sector meltdown has reduced the oil demand outlook. First Republic Bank announced last week that its deposits fell 40% in the first quarter of this year and its stocks went into freefall. This raised an alarm in the banking sector, pushing oil prices down. First Republic collapsed on Monday but was bought by JPMorgan after US regulators invited other banking institutions to step in. Fears of a banking sector meltdown are returning, diminishing the oil demand outlook.

Fears of a slowdown in the U.S. economy also put pressure on oil prices. Recession concerns run high and aggressive rate hikes stifle economic activity, putting a lid on oil prices. Increased rate hike expectations put pressure on cryptocurrency prices. The Federal Reserve raised interest rates by only 25 basis points at its meeting in March, bringing the benchmark interest rate to a target range of 4.75% to 5.00%. Market odds currently favor another 25-basis point rate hike at the Fed’s next meeting on Wednesday. 

Weak Chinese manufacturing data pushed oil prices on Monday. Chinese manufacturing PMI dropped to 49.2 for April from 51.9 in March, missing expectations of 51.4. Non-manufacturing PMI dropped to 56.4 in April from 58.2 in March versus 57.0 anticipated. China is the world’s largest energy importer and prolonged lockdowns have dampened oil demand.

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Written by:
Myrsini Giannouli

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