Amid concerns of potential US recession, the crude oil prices dropped suddenly on Monday despite supply cut by the OPEC countries and sanctions imposed by US over Venezuela. The concerns of recession in US economy and a weak economic outlook were the main reasons which led to drop is prices.
International benchmark-Brent crude oil futures were at $66.56 per barrel at 0410 GMT, down 47 cents, or 0.7%, from their last close, while U.S. West Texas Intermediate (WTI) futures were at $58.52 per barrel, down 52 cents, or 0.9%, from their previous settlement.
Both the crude oil benchmarks plunged by over 3% in the last week hitting their highest since last year November.
Earlier, US Federal Reserve’s bearish remark with 10-year treasury yields slipping below the three-month rate for the first time since 2007 alluded to the potential recession in the US economy.
With an inverted yield curve, the chances of a looming recession seems very obvious. Last time US economy witnessed an inverted yield curve ( where long-term rates fall below short-term ) was in late 2006 and 2007 which was followed by a collapse of equity markets in United States.
Adding to the fear of a more widespread global downturn, manufacturing output data from Germany, Europe’s biggest economy, shrunk for the third straight month. Also US bank Morgan Stanley said, “Estimates for growth and earnings have been revised down materially across all major regions.”
OPEC and non-affiliated allies such as Russia, together referred to as ‘OPEC+’, have pledged to cut supply by withholding around 1.2 million barrels per day (bpd) of oil this year to prop up markets, with OPEC’s de-facto leader (Saudi Arabia) seen to be pushing for a crude price of over $70 per barrel.