Oil futures went higher on Monday after fears of a recession resulted in a dip in prices to their lowest levels since January.
The Traders have been worried that tighter regulations by the Federal Reserve and other central banks will cause a downturn in the global economy, but they have also been wary of tight oil supplies.
Michael Lynch, president of Strategic Energy Economic Research, told MarketWatch that the oil market is likely to see a mix of bargain hunting and concern about Hurricane Ian. The storm shouldn't have a major impact on Gulf oil and gas operations, but there is a possibility that it veers slightly to the west and does some damage. Oil prices had dropped to their lowest level since January, and had settled at their lowest level since January.
Phil Flynn, senior market analyst at The Price Futures Group, said that oil prices Friday started to price in a major recession as the dollar index soared and risk assets contracted. We are very likely to see continued volatility in the energy complex and more downside price risk in the short term. Flynn said that the supply side is still going to be tight and that they are probably overdoing it over the long term, even though the market is pricing in a major recession. When China opens its economy, it should offset any demand destruction that we see from a recession. It will keep the global oil markets very tight. He said that it is very likely that the Organization of the Petroleum Exporting Countries is going to reduce supply, noting that traders may use weakness in oil prices to put on long term bullish option strategies. In Monday dealings, the ICE U.S. Dollar Index DXY, a measure of the currency against a basket of six major rivals, reduced some of its gains in Monday dealings after rising to another 20 year high. The dollar's strength can pressure prices for dollar-denominated commodities, such as oil.
The currency markets remained volatile. The British pound fell to a new record low against the U.S. dollar after the U.K. government introduced a package of large tax cuts that are expected to exacerbate already hot inflation. The pound has gone up since then.