Oil prices resisted Monday, June 13 despite the rise of the dollar and the rout of stock markets, weighed down by fears of economic recession and galloping inflation in major crude-consuming countries such as the United States. Brent crude from the North Sea for August delivery climbed 0.21% to 122.27 dollars. A barrel of US West Texas Intermediate (WTI) for July delivery also rose 0.21% to 120.93 dollars.
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“Crude is the only thing in the world that stayed up today, everything else is falling“, noted Matt Smith analyst for Kpler. “A vicious circle of selling engulfed the markets and yet oil held on“, reported the analyst, noting that it showed”how narrow the crude supply is“. “We could have found reasons to sell, especially with the possibility of new confinements in China, but these would not be a surprise because we know the Chinese policy of zero tolerance vis-à-vis the Covid“, he added.
Beijing launched yet another general screening in the most populous downtown district of the Chinese capital on Monday, after an epidemic resurgence which led to the return of anti-Covid-19 restrictions. “The hope of a rapid and complete return to normal in oil demand after the lifting of containment measures in China, the world’s second largest consumer of oil, has therefore proved premature.commented Carsten Fritsch of Commerzbank. “We will have to expect an uneven rebound in demand in China“, abounded the Kpler specialist.
Crude prices held steady,which shows the strength of the market despite all the headwinds“, he added. Consumer prices resumed their escalation in May in the United States, breaking a new high in 40 years. Over twelve months, inflation is galloping to 8.6%, against 8.3% the previous month. Faced with this inflation, which has become Joe Biden’s economic priority, the American central bank (Fed) is preparing to raise its key rates on Wednesday for the third time this year, and could accelerate the movement.
A much larger increase in interest rates combined with a recession “would also affect oil demand in the world’s largest consuming country“Worried Mr. Fritsch. “Controlling inflation by almost any means necessary is now the most important task for fiscal and monetary policy makerssaid Tamas Varga, analyst at PVM Energy. “It will be at the expense of economic growth, which will inevitably destroy the demand for oil“, he estimated.
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