Oil Drops on Recession Fears Amid Positive China Outlook

By Adedapo Adesanya

Oil recorded a marginal slide on Monday in choppy trading as fears that high inflation and energy costs could drag the global economy into recession offset China’s continuation of loose monetary policy.

Brent crude futures were down 1 cent or 0.01 per cent to $91.62 a barrel, while the United States West Texas Intermediate (WTI) crude was down 15 cents or 0.2 per cent to $85.46 per barrel.

China’s central bank rolled over maturing medium-term policy loans on Monday while keeping its key interest rate unchanged for a second month, in a signal that loose monetary policy would be maintained.

The world’s largest oil producer will also greatly increase domestic energy supply capacity and step up risk controls in key commodities, including coal, oil, gas and electricity.

Analysts warn that China’s adherence to its zero-COVID policy has continued to increase the uncertainties about the country’s economic growth.

Meanwhile, a strong US Dollar and the likelihood of further interest rate increases by the Federal Reserve are helping to contain price gains.

Inflation in the United States remains stubborn, and growth in European Union countries is expected to weaken to 0.5 per cent, according to an official of the International Monetary Fund (IMF).

Oil supply is likely to remain tight after OPEC and allies, including Russia, pledged on October 5 to cut output by 2 million barrels per day while building tension between the Organisation of the Petroleum Exporting Countries, OPEC’s de facto leader Saudi Arabia and the United States could foreshadow more volatility.

Meanwhile, OPEC and its allies, known as OPEC+ output cuts, attracted funds back to the oil markets, with continued heavy buying of crude oil futures and options for a second straight week.

To ease the supply crunch, oil output in the biggest US shale oil basin is due to rise by about 50,000 barrels per day to a record 5.453 million bpd in November, the US Energy Information Administration (EIA) said on Monday.