Citigroup Economists Think Recessionary Risks Have Declined
January 19, 2023
The API inventory report called crude oil inventories up 7.6 million barrels, gasoline inventories up 2.8 million barrels and distillates down 1.8 million barrels.
Citigroup economists said the probability of a global recession has decreased and are now predicting a less hard landing after China abandoned its zero-COVID policy and inflation in the US showed signs of cooling. The bank now sees a 30% chance or a recession this year, down from 50%. It also highlighted a less severe winter in Europe, softening the impact from the Russia-Ukraine gas shock.
The energy markets yesterday had a very volatile day. Prices were up strong most of the day due to data from the IEA that some called supportive, China demand improving quicker and stronger in 2023 than previously expected just last month. Also helping the upside is the end of SPR releases, the demand outlook from China and Russia’s output slowing. The market turned around and sold off late in the day after St. Louis Fed President Bullard said that despite falling inflation and soft retail sales, the Federal Reserve still needs to move quickly to get benchmark interest rates about 5%. This raised market fears that the Fed would raise intertest rates by another 0.5% and push up the US dollar index which in turn puts downward pressure on oil prices.
The average estimate for today’s propane inventories update is for stocks to be down 2.2 million barrels.
US Energy Secretary, Jennifer Granholm, warned Republicans in a letter that limiting President Joe Bidens’s authority to tap the country’s oil reserve would undermine national security, cause crude shortages, and raise gasoline prices.