WTI plummets to $112.00 on recession fears, chatters of Russia’s exit from OPEC+

  • WTI flirts with intraday low, prints three-day downtrend.
  • Growing concerns over recession in the US and China weigh on energy demand outlook.
  • Russia’s likely exit from OPEC+ could increase supply even as EU sanctions hurt the output.
  • OPEC is likely to stick to current policy, risk flows, US data are also important to watch for fresh impulse.

WTI remains on the back foot for the third consecutive day, despite the latest bounce off intraday lows, as fears surrounding growth and Russia’s exit from OPEC+ weigh on the black gold. That said, the quote remains pressured at around $112.50 after dropping to $112.11 during the early hours of Thursday’s Asian session.

As bears cheer the gloomy outlook for demand and a boost to supplies of oil to extend pullback from a three-month high, they ignored the latest draw of API Weekly Crude Oil Stock for the week ended on May 27. That said, the industry stockpiles shrank by 1.181M versus the previous addition of 0.567M.

Strong US data and Fed Beige Book raised concerns over economic growth and inflation in the US. That said, the US ISM Manufacturing PMI for April rose to 56.1 versus the 54.5 expected and the 55.4 prior. Further, the US JOLTs Job Openings eased below 11.8 prior readings but matched 11.4 market forecasts. It’s worth noting that the monthly release of the Fed Beige Book showed that the majority of districts indicated slight or modest growth while most informed of continued price rises. Also, three districts, out of 12, expressed concerns about a US recession.

It’s worth noting that China’s successive contraction in manufacturing activities, as per the latest Caixin Manufacturing PMI, joins the hawkish path of the global central banks to also weigh on the black gold.

On Wednesday, the Bank of Canada (BOC) announced 50 basis points (bps) rate hike and the US is well on that path as St. Louis Federal Reserve Bank President James Bullard also raised concerns about the US recession as he repeated that a pace of 50 bps hike per meeting is a “good plan” for now. Further, Federal Reserve Bank of Richmond President Thomas Barkin mentioned, “You can’t find a recession in the data or actions of business execs,” speaking on Fox Business.

Elsewhere, speculations over Russia’s departure from OPEC+, comprising the Organization of the Petroleum Exporting Countries (OPEC) and Russia, triggered through a Wall Street Journal (WSJ) piece, also drowned the black gold. Further, chatters that the OPEC will keep its current policy of increasing output by 432,000 BPD, per Reuters, during today’s meeting exerts additional downside pressure on the WTI oil prices.

In addition to the aforementioned catalysts, today’s US ADP Employment Change for May, expected 300K versus 247K prior, will be eyed as well. Furthermore, the official weekly oil inventory data from the Energy Information Administration (EIA), expected -0.067M versus -1.1019M prior, will offer additional directions and should be watched carefully.

Technical analysis

Despite the latest pullback, WTI crude oil prices remain beyond three-week-old support and the 10-DMA level surrounding $112.00, which in turn keeps buyers hopeful. However, a clear upside break of March’s top surrounding $115.90 becomes necessary for the energy bulls to retake the control.

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