Crude Oil Wavers Amid Recession Fears
(Bloomberg) -- Oil prices toggled between gains and losses as anxious traders weighed a slowdown in the global economy with increasing tensions in OPEC member Venezuela.
Futures fell as far as 1.5 percent in New York but later pared much of the losses, joining the volatility in equity markets. A closely watched gauge of U.S. Treasuries inverted on Friday, signaling a recession, may be in the offing. Yet, a U.S. warning to Russia not to intervene in Venezuela brought a reminder of fragile global supplies, and a decline in the dollar also aided crude prices.
Despite some economic warning signs, the threats to oil consumption seem “overpriced," said Phil Flynn, a senior market analyst at Price Futures Group Inc. in Chicago. U.S. unemployment remains low, gasoline demand has been robust and crude supplies look to get tighter in the coming months thanks to cuts by OPEC and its partners, he said.
“There’s no real sign if you look at the real economy of a recession happening any time soon," Flynn said. “Does the oil market care about that today? Probably not. But they are going to start to care about that in a few weeks when they start to see the inventories drawing down."
U.S. crude retreated after reaching $60 a barrel last week. Disappointing economic data and a lack of resolution to the U.S.-China trade war have dampened sentiment. That’s offset continued signs that the producer coalition led by the Organization of Petroleum Exporting Countries is committed to curbing output. Disruptions in Venezuela and Iran have also helped to stabilize prices.
WTI for May delivery lost 8 cents to $58.96 a barrel on the New York Mercantile Exchange at 11:50 a.m. local time, after earlier touching its lowest level since March 18. Prices declined 1.6 percent on Friday.
Brent for May settlement was up 9 cents to $67.12 a barrel on the London-based ICE Futures Europe exchange, after falling more than 2 percent over the previous two sessions. The global benchmark crude was at a premium of $8.13 to WTI.
U.S. stocks shifted between gains and losses Monday, and European and Asian stocks tumbled after the gap between the 3-month and 10-year U.S. debt yields turned negative at the end of last week. The inversion came after an index of American manufacturing slowed, and weaker-than-expected factory output data from France and Germany.
While global crude supplies are thinning, “we’re more sensitive to when the next recession is coming, given that the last one was so painful," said Cailin Birch, a global economist at the Economist Intelligence Unit in London. “It’s a sufficiently scary warning sign that it’ll continue to hang over the market."
--With assistance from James Thornhill and Sharon Cho.
To contact the reporters on this story: Alex Nussbaum in New York at firstname.lastname@example.org;Grant Smith in London at email@example.com
To contact the editors responsible for this story: Simon Casey at firstname.lastname@example.org, Carlos Caminada
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