Oil Plunges Under $100 as Recession Fears Mount
Global oil prices plunged the most in several weeks as investors pared bets on crude and commodities demand amid increasing signs of recession in the world's biggest economy. The commodity price slump, which pulled copper prices to the lowest in more than nineteen months, came amid a so-called inversion of the U.S. Treasury bond yield curve, a condition which occurs when 2-year note yields climb past 10-year yields. According to a study from the San Francisco Federal Reserve, a sustained inverted yield curve has preceded all of the nine recessions the U.S. economy has suffered since 1955, making it an extremely accurate barometer of financial markets sentiment. The Atlanta Fed's forecasting tool suggests the economy is contracting at a 2.1% clip as it enters the third quarter, following what is likely to be two consecutive quarters of shrinkage between January and June. WTI crude futures for August delivery, the most tightly-linked commodity to U.S gasoline prices, were marked $10.74 lower on the session at $99.67 per barrel, falling below the $100 mark for the first time since early May. Brent crude contracts for September delivery, the global pricing benchmark, fell $10.59 to change hands at $102.97 per barrel. The move downward in crude, however, belies a notable lack of emergency U.S. stockpiles, with recent data from the Energy Department showing that the U.S. Strategic Petroleum Reserve is sitting at its lowest levels since April of 1986. That said, crude production has started to accelerate, with U.S. output rising to 12.1 million barrels per day last week, the highest in more than two years, as drillers seek to capitalize on the consistently higher prices and react to pressure from President Joe Biden to increase the flow of oil and gas products to American consumers. The slump in crude could soon show up at the pumps, as well, with Data from the AAA motor club indicated that U.S. gas prices eased from this month's all-time high to a national average of around $4.80 per gallon over the holiday weekend, the lowest in more than a month. For the time being, Americans are spending nearly $100 million per day less on gasoline than when prices peaked a few weeks ago, and that’s well-needed relief at a time when gas prices remain near records. U.S. oil companies are still likely to post record profits for the June quarter, however, thanks in part to the impact of sanction on the sale of Russian crude and the ongoing ban on exports from Iran. The energy sector is set to produce record earnings over the three months ending in June, with collective profits rising 222.6% from last year to $50.8 billion, paced by a staggering 762% surge from the oil & gas refining and marketing sub-set.
