Oil futures: Crude resumes slide on economic headwinds, bearish EIA report
Quantum Commodity Intelligence - Crude oil futures Wednesday were sliding lower as economic headwinds continued to overshadow concerns around disruptions to Russian exports, while the latest EIA report delivered a further blow.
Front month February ICE Brent futures were trading at $78.01/b (1810 GMT), compared to the day's 11-month low of $77.70/b and Tuesday's settle of $79.35/b.
At the same time, Jan23 NYMEX WTI was trading $72.76/b after registering a yearly low of $72.42/b earlier and Tuesday's settle of $74.25/b.
Traders are "fleeing the market" because of the "absurd" price actions oil has recently experienced, Ed Morse, global head of commodity research at Citigroup, said in a Bloomberg Television interview.
"We are getting toward the end of the year, and those who made money this year did not want to lose any," added Morse, noting declining liquidity levels.
Several recessionary warnings have come this week, including Goldman Sachs CEO Solomon warning "economic growth is slowing," while JPMorgan's CEO Jamie Dimon flagged the possibility of a "mild to hard" recession.
"Oil has tended to be caught in the backwash from top-down macro trades," said Paul Horsnell, head of commodities research at Standard Chartered, noting oil was responding negatively to economic data, regardless.
"A negative US economic data point causes oil to be sold as recessionary fears increase, but a positive data point can also cause oil selling through being good for the US dollar and negative for risk assets," he said.
"There is always interplay between those effects, but in the past three weeks oil has tended to fall after both good and bad economic data."
Reports that at least 20 oil tankers are queuing to cross from the Black Sea into the Mediterranean have so far had little impact on prices, although some reports indicate Russian flows are sharply down.
Prices lifted off lows on reports that Chinese authorities are considering downgrading Covid-19 from the top classification of infectious diseases in a move that would relieve local governments of the legal obligations of introducing strict controls such as lockdowns and isolating positive cases.
Markets staged a recovery at one point but received a further blow after the latest EIA report revealed a sharp build in US product inventories.
Oil markets had also found some early support after the American Petroleum Institute figures released late Tuesday revealed that US commercial crude inventories fell by 6.43 million barrels last week, against expectations for a drop of under 4 million barrels.
This was offset by gasoline stocks increasing by 5.93 barrels, while distillate inventories jumped by 3.55 million barrels.
On refined products, middle distillates led Europe lower on Tuesday, with front-month ICE low sulfur gasoil futures touching their lowest since mid-March while cracks fell over $8/b on the day.