Oil Futures Extend Losses Amidst US Recession Fears and Middle East Tensions
In a rollercoaster session on Monday, oil futures continued to decline as concerns about a recession in the US, the top oil consumer, overshadowed supply fears due to escalating tensions in the Middle East, the largest oil-producing region in the world.
As fears of a US recession spread, share markets across Asia took a hit as investors rushed away from risk assets, anticipating rapid rate cuts to boost growth.
By 8:05 a.m. Saudi time, Brent crude fell by $1.04, or 1.4 percent, to $75.77 a barrel, while US West Texas Intermediate crude dropped to $72.43 a barrel, down $1.09, or 1.5 percent.
Both Brent and WTI experienced over a 3 percent drop on Friday, marking their fourth consecutive week of losses, the most significant decline since November.
The weak July payrolls report on Friday fueled US recession fears, amplifying existing concerns about Chinese demand, according to analysts at ING led by Warren Patterson.
The decrease in diesel consumption in China, a major contributor to oil demand growth, has been a factor putting pressure on oil prices.
Further downward pressure on oil prices came after OPEC+ maintained its plan to phase out voluntary production cuts starting in October, leading to anticipated supply increases later this year, analysts say.
Despite production cuts by the group, a Reuters survey revealed an increase in OPEC oil output in July.
However, geopolitical risks in the Middle East provided some support for oil prices as conflict in Gaza continued and talks in Cairo failed to produce results.
Amidst escalating tensions, Israel and the US are preparing for a potential wider regional war after Iran and its allies Hamas and Hezbollah vowed retaliation for recent killings, raising concerns about significant risks in the region, according to Sydney-based IG market analyst Tony Sycamore.