WTI plunges to near $70.50 amid gloomy outlook as hopes for global recession escalate

West Texas Intermediate (WTI), futures on NYMEX, have witnessed an intense sell-off in the European session. The oil price has shown a vertical decline and has dropped to near $70.63. The black gold has surrendered the majority of gains added to optimism about production cuts by Saudi Arabia.

The US Dollar Index (DXY) has displayed a decent recovery move after finding strength near the crucial support at 103.80. A solid recovery in the USD Index has also weighed on the oil price.

Despite the announcement of production cuts by Saudi Arabia, oil prices are failing to come out of the bearish trajectory. It seems that gloomy demand is the major catalyst that is dragging the oil price lower. Global central banks are gearing up for a fresh interest rate hike to strengthen their side in the battle against stubborn inflation.

This month, the Federal Reserve (Fed), the European Central Bank (ECB), and the Bank of England (BoE) are expected to tighten their monetary policy further. The street is confident that central banks belonging to the shared continent will definitely step up their interest rates whole views about Fed’s interest rate decision are mixed.

After a fresh rate hike cycle, hopes of a recession in the global economy will skyrocket as lending activity by commercial banks would further reduce. Investors should note that Germany has already reported a recession after displaying a contraction in the Gross Domestic Product (GDP) consecutively.

The oil price has come under pressure as U.S. Secretary of State Antony Blinken is traveling to Saudi Arabia for June 6-8. The visit to the world's largest oil exporter has been scheduled days after Riyadh pledged to further cut oil production, a move likely to add tension to a U.S.-Saudi relationship already strained by the kingdom's human rights record and disputes over America's Iran policy, as reported by Reuters.