Adedapo Adesanya
By Adedapo Adesanya
Oil prices dropped 2 per cent on Tuesday after two sessions of gains as deepening concerns of an economic slowdown and a stronger Dollar outweighed hopes of higher Chinese demand.
Brent crude fell by $1.96 or 2.4 per cent to settle at $80.77 a barrel, and the US West Texas Intermediate (WTI) crude dropped $1.69 or 2.2 per cent to settle at $77.07 a barrel.
Consumer confidence in the world’s largest oil producer, the US, dropped to a nine-month low in April, feeding worries about a recession.
The Conference Board said its consumer confidence index fell to 101.3, the lowest since July 2022, from a revised 104.0 in March.
This is coming a day after a US regional bank, First Republic, reported a flight in deposits of more than $100 billion, stoking fears of a potential banking crisis, some weeks after more than two banks collapsed.
Pressure also came as the US Dollar rose on deepening worries about corporate earnings and the global economy.
The US Dollar index climbed 0.6 per cent to 101.83, having dropped more than 4 per cent since March 8.
A stronger greenback pressures oil demand by making the commodity more expensive for buyers holding other currencies.
Meanwhile, market investors remained wary that possible interest rate hikes as part of bids to fight inflation could slow economic growth and dent energy demand in the United States, Britain, and the European Union.
The US Federal Reserve, the Bank of England and the European Central Bank are all expected to raise rates at their coming meetings.
Oil traders also worried that weak refining margins globally could force refiners to curb oil buying.
The market overlooked optimism that holiday travel in China would boost fuel demand.
Support came from the supply side after Iraq’s northern oil exports showed little sign of an imminent restart after a month-long standstill.
Also, members of the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) prepare for the start of voluntary output cuts in May after moving to cut an additional 1.16 million barrels per day.
