Crude oil continues to tumble as global growth worries dominate trading
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Crude oil futures extended their sharp slide Wednesday, a move analysts say stems from fears that aggressive tightening of monetary policy by the Federal Reserve and other central banks will cause a global economic slowdown, weighing on crude prices and overall market sentiment.
WTI crude oil (CL1:COM) for February delivery trades -4.1% to $73.76/bbl while March Brent crude (CO1:COM) -4% to $78.78/bbl.
ETFs: (NYSEARCA:USO), (NYSEARCA:BNO), (UCO), (SCO), (DBO), (DRIP), (GUSH), (USOI), (NRGU)
Notable energy stocks showing sharp declines include Baker Hughes (BKR) -2.9% and APA Corp. (APA) -1.9%; the overall energy sector (XLE) has eked out a slight gain, +0.3%.
While OPEC+ may "make noise" about possible production cuts, declining global growth will lean on market demand and challenge the group's unity, Spartan Capital Securities chief market economist Peter Cardillo said.
China's GDP is expected to grow by 4.8% in 2023 from 3% last year, based on Bloomberg surveys of economists, pointing to room for improvement that will accompany greater demand for energy - but that optimism seems to be for a later date.
UBS analysts forecast Brent crude prices will reach $110/bbl and WTI crude to hit $107 in 2023, expecting strong returns within energy this year with crude oil seen as the top energy performer, compared with coal and natural gas in 2022, as China's reopening lifting oil demand to a record high in H2.
Meanwhile, auto club AAA said the U.S. average cost of gasoline at the pump jumped more than $0.03/gal overnight in the biggest one-day percentage gain since June.
U.S. natural gas futures rebound by ~4.5%, after warm weather and ample supplies have pushed prices down more than 50% since the summer, including a 10% plunge on Tuesday.