Oil hit by recession fears, gas prices remain high
Oil prices are steady on Monday after tumbling late last week as economic fears took hold. The market remains extremely tight but the threat of recession is one of the few negative forces for crude prices. Whether that will be enough to create anything more than two-way price action is another thing. The price had been powering higher over the previous month and the bullish case remains far more convincing.
Output in Libya reportedly recovering back to 700,000 barrels per day from 100,000-150,000 could also be contributing to the slight easing in the market in the short-term.
European gas prices surged recently and it seems Russia is in no rush to ease the pressure on the bloc, having reportedly rejected an offer from Ukraine to transit more supply through its pipeline in order to accommodate for lost flows through Nord Stream. That would appear to support the view that the move by Gazprom is politically motivated and comes at a time when Europe is filling reserves and has lost crucial US LNG supplies via the Freeport facility.
Gold building a bullish case
A volatile few weeks for gold which finds itself broadly back where it started, fluctuating around USD 1,850. The good news for gold is that a lot of monetary tightening is now priced in which is the primary bear case for it. Heightened recession risk appears to be driving demand for the traditional safe haven which could keep it in favour going forward. Whether that will be enough to push it above USD 1,870 and trigger a larger rally, I’m not so sure. But with recession talk getting louder, the bullish case is as good as it’s been for some time.
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