WTI hovers above 69.00, downside looks likely as global recession worries deepen

West Texas Intermediate (WTI), futures on NYMEX, are oscillating above 69.00 in the early European session. The oil price is expected to extend its losses as fears of a recession in the global economy are skyrocketing.

The economic outlook for the United States economy is still in bad shape as interest rates by the Federal Reserve (Fed) are above 5%. And, now rising expectations of one more interest rate hike in June’s monetary policy meeting, considering resilient consumer spending and decent labor market conditions, are bolstering fears of a recession. The German economy has already slipped into recession after reporting a contraction in Gross Domestic Product (GDP) figures consecutively for two quarters.

Meanwhile, contracting Chinese factory activity has also weighed on oil prices. In Asia, China’s National Bureau of Statistics (NBS) reported Manufacturing PMI at 48.8, lower than the estimates of 49.4 and the former release of 49.2. Investors should not that a figure below 50.0 is itself considered a contraction. It is worth mentioning that China is the largest importer of oil in the world and weak economic activities in China would have a significant impact on the oil price.

Later this week, OPEC’s meeting will be keenly focused as production cuts would be discussed to support energy prices. Tensions between Russia and Saudi Arabia have remained higher as the former is consistently pumping cheaper oil into the global economy, undermining efforts made by the latter to bolster energy prices.

The impact of cutting overall production further by OPEC+ members excluding Russia could be nullified as Russia is not committed to keeping the pledge anymore.

On late Wednesday, investors will keep an eye on the release of oil inventories for the week ending May 26 by the US American Petroleum Institute (API).