HONG KONG, July 6(ABC): Oil prices rose Wednesday after suffering a painful drop the previous day, though the euro remained wedged at a 20-year low and equities mostly fell in Asia as recession fears continue to flow through trading floors.
Both main crude contracts were pummelled Tuesday as investors grow increasingly worried that leading economies will contract this year or next owing to sharp central bank interest rate hikes aimed at fighting decades-high inflation.
The main US contract WTI sank nearly nine percent below $100 a barrel for the first time since April, while Brent shed around 10 percent on expectations that any recession will slam demand, despite tight supplies caused by the Ukraine war.
And Citigroup said in a note that a recession could lead prices to as low as $65 this year if OPEC and other major producers do not step in to provide support and companies do not invest.
There are also signs that the high cost of fuel is hurting demand, in turn pushing prices down. Earlier this week, the head of Asia at crude trading giant Vitol said he saw signs consumers were beginning to feel the pressure of high prices — a phenomenon known as demand destruction.
Still, Goldman Sachs said it thought the commodity would remain elevated.
“While the odds of a recession are indeed rising, it is premature for the oil market to be succumbing to such concerns,” the bank’s analysts including Damien Courvalin said in a note.
“The global economy is still growing, with the rise in oil demand this year set to significantly outperform GDP growth.”