Recession Concerns Trigger Crude Oil Price Drop
Jakarta. Crude oil prices fell to $67.26 per barrel on Tuesday, triggered by concerns over a potential US recession. Additionally, weakening demand from China and increased Russian supply exceeding Saudi Arabia's plans for further production cuts contributed to the decline.
The Research and Development (RnD) team at the Indonesia Commodity & Derivatives Exchange (ICDX) stated that the economic data from the United States and China raised concerns about demand in the world's two largest oil consumers. Investors are also worried about the prospect of further interest rate hikes by major central banks, which could weigh on the global economy and reduce overall demand.
"On the supply side, Russian oil exports to China and India reached record levels in May, offsetting Saudi Arabia's intention to reduce production in July," the ICDX RnD team wrote in their research.
The ICDX RnD team added that oil prices face the risk of further decline due to China's fragile economic recovery. Most market participants expect the US central bank to leave interest rates unchanged at its policy meeting.
According to the ICDX RnD team, the Federal Reserve's interest rate hikes have strengthened the greenback, making dollar-denominated commodities more expensive for holders of other currencies and weighing on prices.
The European Central Bank is expected to raise interest rates by another quarter percentage point on Thursday and on Friday, the Bank of Japan, is expected to maintain its policy.
"From a technical perspective, oil prices have the potential to encounter the nearest resistance level at $68.78 per barrel. However, if they encounter negative catalysts, prices could potentially fall to the nearest support level at $65.72 per barrel," said the ICDX RnD team.Tags: