Darkening Economic Outlook Clouds Demand Forecast
September 26, 2022
Javier Blas of Bloomberg wrote last week that there are strong reasons to be bullish about commodities, but the darkening macro background is starting to win out. Demand growth from rapidly slowing economies will fall faster than the supply of commodities can adjust. These comments are not a very positive outlook for the economy. It makes the point that if an increase in supplies is not on the way, then a big decline in demand is the only other alternative to balance markets.
The Baker Hughes Rig Count had oil rigs up 3 to a total of 602 and last year there were 421 oil rigs at this time.
The global outlook for the economy continues to get worse, leading global risk assets to continue their sell off to start this new week. The fear of faster inflation is leading more to believe a recession is coming. The dismal outlook has gained more traction in the last week. Negative forecasts and a rising US dollar is putting selling pressure on all commodities.
The first real hurricane threat to the gulf could reverse the current selling in the energy markets, but it would likely only be temporary.