West Texas Intermediate shed more than 8 per cent to settle under US$96 a barrel for the first time since early April. Rising virus cases in China and looming US inflation data are stoking concerns about demand. Meanwhile, dwindling liquidity is also exacerbating price moves. Money managers have become more bearish on the main oil benchmarks, cutting their net-long positions last week to the lowest since 2020.
Despite recession fears, several energy administrations agree that supply tightness is set to worsen. IEA’s Executive Director Fatih Birol said nations “might not have seen the worst” of a global energy crunch while OPEC’s first look at 2023 showed no relief from market tightness. Underscoring supply constraints, the US lowered its growth forecast for oil production through 2023 citing inflation and labor shortages.