Crude Oil:Recession Fears Take Hold
It is hard to escape from the fact that nearly every single piece of news and analysis appears to be indicating that a recession is looming. Be it the Bank of England’s warning of a five-quarter-long recession drag or the lack of action from OPEC+ on oil production, the bad omens just keep on coming. Inevitably, this has impacted oil prices, too, almost falling back to where they were before the onset of Russia’s invasion, with ICE Brent trending around $96 per barrel. For the first time in weeks, oil futures contracts started to reflect expectations of a weak winter, with monthly spreads halving week-on-week. We are still firmly in backwardation, but it no longer seems as drastic as it had been before the summer.
OPEC+ Increases September Target by a Meager 100,000 b/d
Meeting to set its collective September 2022 production target, OPEC+ has agreed to the lowest monthly quota increase since 1986, at 100,000 b/d, implying that the oil group is still assessing the risks of recession to take more radical steps.
OPEC Promises to Have More Capacity for Winter
Saudi Arabia and the United Arab Emirates are apparently ramping up spare production capacity to be able to deliver any significant demands in case of a winter supply crisis, seeking to soften the reputational blow following the 100,000 b/d quota hike for September.
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