Faced with fears of recession, oil prices fall

The armed conflict between Russia and Ukraine has had a major impact on hydrocarbon prices; especially those of black gold. After reaching peaks, fears of recession are causing oil to fall by more than 5% this Wednesday, June 22, 2022.

Black gold prices fell 5% on recession fears. Indeed, the markets fear the fact that a sharp rise in interest rates aimed at containing inflation will lead to a recession.

On Wednesday, the price of a barrel of Brent lost 5.2% to settle at 108.62 dollars; and that of the barrel of West Texas Intermediate (WTI) lost 5.6% to reach 103.31 dollars. While yesterday, a barrel of Brent from the North Sea for delivery in August rose by 1.67% to settle at 116.04 dollars; and WTI gained 2.30% to settle at $112.08.

This downward trend comes after several months marked by rising oil prices. Oil’s rise has been supported by the Russian-Ukrainian conflict and concerns about insufficient supply relative to demand; and this, on the sidelines of a lively economic context after the lifting of the Covid-19 health restrictions.

Faced with this rise in energy prices, the fears of economists are beginning to be felt regarding the increase in borrowing costs by central banks. Thus, this situation is fueling fears about a recession; which impacted the price of black gold and caused prices to fall.

Oil prices: what does Goldman Sachs predict?

Currently, everyone is waiting for the measures planned to fight the surge in prices which should be unveiled during the two days of hearing in the US Congress of the head of the US Federal Reserve, Jerome Powell.

However, the predictions of Goldman Sachs investment bank indicate that black gold prices will resume their ascent. “With demand for commodities exceeding supply; markets remain tight even as growth rates slow,” Goldman Sachs said.

The same investment bank recalled the fact that “the slowdowns induced by the Fed are only a short-term alleviation of the symptom (inflation) and not a remedy to the problem”; noting that the problem was underinvestment.

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