Chinese Economic Worries Put Downward Pressure on Energy Prices
October 11, 2022
Continued bad economic news out of China has put strong selling pressure on energy prices. The Caixin service purchasing managers index for China fell in September to a reading of 49. From a reading of 55 in August. A reading below 50 indicates contraction. This news along with the concerns about a global recession with rising interest rates and slowing economies is causing the energy sell off.
The US dollar has been on a run higher as well up 2.7% over the last four trading days also putting selling pressure on commodities.
Fitch ratings said the actual OPEC+ oil output cut will be lower than the production quotas cuts. It said the recessionary economic outlook will lead to lower oil demand.
Saudi Energy Minister said the real supply cuts will be about 1 million to 1.1 million barrels per day.
France’s government is threatening to take control of some refineries that have been shut down for weeks by the worker’s strike. It is being reported that 60% of Frances’ refining capacity is offline.
The energy markets continue to struggle with what will drive prices going forward as there is the ongoing battle between tight supply concerns, and recession fears. Then you can add in OPEC+ production cuts and the impact of a potential Russian oil price cap.
Yesterday Jamie Dimon the CEO of JPMorgan said that the US and other economies are likely to sink into recession next year.