Crude oil trading alert: demand hit by recession fears resurface, oil prices supported by geopolitical tensions, fears difficult to fall sharply

By    1 Aug,2022

U.S. oil is now at $97.49 a barrel; prices fell nearly 1 percent Thursday as concerns that a possible global recession would hit energy demand offset a drop in U.S. crude inventories and a rebound in gasoline consumption, but geopolitical tensions remained supportive.


Intraday focus on U.S. June PCE price index annual rate, U.S. Chicago PMI in July.

Positive factors affecting oil prices

[U.S. stocks rallied for a second consecutive day].

U.S. stocks rallied for a second straight day on Thursday, with all three major stock indexes up more than 1 percent, as data showed the economy shrank for a second straight quarter, sparking speculation among investors that the Federal Reserve may not need to raise interest rates as aggressively as some had feared.

The indicator 10-year U.S. bond yield retreated after the data was released , and utilities and real estate stocks, two sectors that tend to rise when U.S. bond yields fall, were the best performers among the S&P 500's major sectors.

Mona Mahajan, senior investment strategist at Edward Jones, said the drop in yields could suggest "the market believes the Fed will have to reverse and lower rates at some point, perhaps within the next 12 months, which does mean the pace of tightening will become more gradual going forward."

In addition, forecasts for second-quarter earnings growth rose this week as more S&P 500 component companies reported results and beat analysts' expectations. Ford shares jumped 6.1 percent after reporting better-than-expected quarterly net income. After the bell, Amazon jumped more than 12 percent after the online retailer reported quarterly sales that beat Wall Street expectations. Amazon was up 1.1 percent in regular trading hours. 

Earlier in the day, the U.S. Commerce Department said the U.S. economy unexpectedly contracted in the second quarter, the second consecutive quarterly decline in the government's reported gross domestic product (GDP). This increases the likelihood that the economy is on the brink of recession, which some investors say could prevent the Federal Reserve from continuing to aggressively raise interest rates as it battles high inflation.

The Nasdaq recorded its biggest two-day percentage gain since May 27. Stocks surged in the previous session as the magnitude of the Fed's rate hike and remarks from Chairman Jerome Powell eased concerns about the pace of rate hikes. Alan Lancz, president of investment advisory firm Alan B. Lancz & Associates, said, "More and more investors are starting to buy now because they don't think there will be any big surprises, at least for the rest of the summer."