Oil Price Prediction – Oil Falls Below $100 Amid Recession Fears

Key Insights

• The sell-off in the oil markets continue. 
• Traders fear that a potential recession will crush demand for oil. 
• Tomorrow, the EIA report will show whether U.S. domestic oil production continues to increase.

Recession Fears Put Pressure On Commodity Markets

WTI oil declined below the $100 level amid worries about a potential global recession. Meanwhile, copper, which is also sensitive to the economic outlook, has also slipped to new lows.

The potential recession has been the main topic for commodity markets in recent trading sessions. High inflation puts significant pressure on economies, and it remains to be seen whether demand for oil will be strong enough to support the recent $100 – $120 range.

There’s also another bearish catalyst in play. Coronavirus. China continues to battle outbreaks of the disease, and fears of lockdowns serve as an additional bearish catalyst for oil markets.

In Italy, the number of daily coronavirus cases has recently exceeded  100,000. There’s no talk about additional restrictions during the busy summer season, but the situation presents a risk for economic activity and demand for oil.

Domestic Oil Production Data Will Have A Major Impact On Oil Price Dynamics

Tomorrow, traders will have a chance to take a look at the EIA Weekly Petroleum Status Report. The report is expected to show that crude inventories declined by 1.1 million from the previous week.

Traders will likely focus on the domestic production data. The previous report indicated that domestic production increased from 12 million bpd to 12.1 million bpd. The increase in domestic production is bearish for oil markets as it shows that producers have started to react to high prices.

The market may also pay attention to gasoline inventories, which are projected to decline by 1.6 million. The dynamics of gasoline inventories show the strength of gasoline demand during the driving season.

Typically, the EIA report has a material impact on oil price dynamics. However, traders will also need to monitor global commodity markets as recession fears serve as the main catalyst for oil markets right now.

For a look at all of today’s economic events, check out our economic calendar.