Crude oil routed again ahead of expected Fed rate hike as recession fears rise
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Crude oil prices plunge for a second straight day, with WTI crude tumbling below $70/bbl, on mounting anxiety over the prospect of a U.S. recession amid questions over the financial stability of regional banks, and ahead of a likely 25 basis point rate hike from the Federal Reserve.
The oil price drop is similar to the March decline when the banking turmoil first started, which suggests concerns in the market are rising about the outlook for demand.
Iran seized a second oil tanker from the Strait of Hormuz in less than a week, news that normally might boost crude oil futures.
Front-month Nymex crude oil (CL1:COM) for June delivery -4.6% to $68.37/bbl, and front-month July Brent crude (CO1:COM) -4.3% to $72.06/bbl.
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Energy is easily the day's weakest sector performer, with some of the biggest losses showing up at Marathon Petroleum (MPC) -5.1%, Diamondback Energy (FANG) -3.5%, Valero Energy (VLO) -3.2%, ConocoPhillips (COP) -2.9%.
"With short sellers back in control, prices may once again overshoot to the downside," Saxo Bank's head of commodities strategy Ole Hansen said.
Morgan Stanley analysts lowered their year-end outlook for Brent crude to $75/bbl from $87.50/bbl, saying forecasts for declines in Russian supply are too high while the demand boost from China's re-opening after lifting COVID-19 restrictions has largely played out.
Crude oil's losses have more than exceeded the gains that followed the OPEC+ decision to cut production.