WTI licks its wounds following strong recession worries drop

The price of oil was sold off heavily on Tuesday, losing over 5% after falling from a high of $97.65 to a low of $90.55 on the day so far. Recession concerns have moved back to the fore at the same time that we have oversupply and while the potential for OPEC+ production cuts ease.

Friday's hawkish speech from Federal Reserve chair Jerome Powell and weekend comments from European officials saying an economic slowdown is likely that could slow demand. As a consequence, West Texas Intermediate crude for October delivery was last seen down US$2.31 to US$94.70 per barrel, while October Brent crude, the global benchmark, was down US$3.11 to US$101.98.

Meanwhile, the weekend reports of militia fighting in Libya raised concerns that the country's 1.2-million barrels per day of oil exports would again be at threat should oilfields and ports again be at threat, though shipments have not yet been impeded. "Following months of blockades of oilfields and oil terminals, production had only just normalised again at a level of 1.2 million barrels per day," Commerzbank said in a note.

Nevertheless, analysts at TD Securities argued, ''energy supply risk is soaring once again. Energy market participants are increasingly sceptical that a potential Iran deal is imminent, with final-hour negotiations showing signs of a potential impasse. President Raisi's recent comments suggest that the safeguards issue remains a point of contention that could derail a potential agreement if Iran does not concede.''

''We reiterate that failure to reach a deal with Iran would suggest that oil is still on a runaway train, as even slowing demand growth would still continue to sap the world's spare capacity. Further, signs that Saudi Arabia and Gulf nations are reviving the OPEC+ put reinforce the likelihood that energy supply risks will continue to insulate prices from demand-side headwinds as oil markets stare down the barrel of a recession.''