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Futures Movers: Oil slumps as fears over economic growth take center stage

Oil futures fell Thursday, under pressure as a global equity selloff continued on rising fears that surging prices will hurt economic growth.

Price action

West Texas Intermediate crude for June delivery



fell $1.55, or 1.4%, to $108.04 a barrel on the New York Mercantile Exchange.

July Brent crude


was down 93 cents, or 0.9%, to $108.18 a barrel on ICE Futures Europe.

June gasoline

was down 2.9% at $3.613 a gallon after hitting all-time highs earlier this week, while June heating oil

fell 2.3% to $3.585 a gallon.

June natural-gas futures

declined 3.1% to $8.123 per million British thermal units.

Market drivers

Crude oil was lower Thursday for a third session after oil and other energy futures fell Wednesday despite data that showed an unexpected fall in U.S. crude inventories and a larger-than-expected drop in already tight gasoline stocks —- a move analysts said likely reflected selling in response to a rout in the equity market.

“We…attribute the price slide to external factors such as the selloff on the U.S. stock markets,” said Carsten Fritsch, analyst at Commerzbank, in a note. ”The S&P 500 saw its most pronounced daily fall in nearly two years yesterday, for instance. As a result, many market participants are likely to have also jettisoned their oil forward contracts.”

Fears of slower economic growth and lower energy demand may remain a factor on Thursday, with global equities under pressure and U.S. stock-index futures pointing to another round of losses after a Wednesday decline that saw the Dow Jones Industrial Average

fall 1,164.52 points, or 3.6%, and the S&P 500

drop 4%, for their biggest one-day declines since June 11, 2020.

The selloff was triggered by disappointing results from retailer Target Corp.
which showed rising costs had cut more deeply than expected into margins, analysts said. The reaction reflected growing fears of a stagflationary environment —- a combination of persistent inflation and stagnant economic growth.

Crude had found support earlier in the week as China began to loosen its lockdown of Shanghai. China’s COVID-19 lockdowns have undercut demand from the world’s largest oil importer. The implications of the Russia-Ukraine war remain a key driver of supply-side concerns, with European Union officials continuing negotiations on a plan to phase out imports of Russian energy.

Oil, meanwhile, remains rangebound between rising trend support at $99-$100/barrel while $115-$116 is likely to continue to offer initial resistance” for WTI futures, wrote analysts at Sevens Report Research, in a note.

“With all of the additional influences discussed above that will impact oil in the near term, the largest influence on energy markets will remain the Russia/Ukraine war,” they said. “Until there is a resolution there, supply concerns will keep a fear bid in the market.”

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