Oil Prices Decline Amid Growing Recession Concerns

By Gina Lee

Oil prices fell on Tuesday morning in Asia as investors expressed growing concerns about a potential recession and declining demand.

Prices dropped 0.44% to $110.29, while other oil metrics were down 0.41% to $109.84.

The worries stemmed from discussions at the annual Davos economic summit, where several influential figures highlighted the risk of a global recession. The Managing Director of the International Monetary Fund indicated that while she does not foresee a recession for major economies, she could not completely dismiss the possibility.

As noted by Fujitomi Securities Co. Ltd. analyst Toshitaka Tazawa, “Investors were selling off as they expected higher oil prices to dent consumption for fuels worldwide.” However, he mentioned that ongoing concerns about tight global supply and optimism for demand recovery in China were providing some support to prices, predicting that Brent crude futures would remain within a range of $105-$115 per barrel for the time being.

China, the world’s largest oil importer, is looking to implement stimulus measures, including the initiation of new investment projects. The country plans to offer over 140 billion yuan in additional tax relief to mitigate the severe impact of lockdowns on businesses. Shanghai is also preparing to normalize activities as COVID-19 case numbers decline.

In Europe, the European Union is expected to reach an agreement on an embargo for Russian oil imports “within days,” according to Germany, its largest member country.

Market participants are now waiting for U.S. crude oil supply data set to be released later today.