On the first day of trading in 2023, USOIL hit a recent high. USOIL began going down on the second day of 2023 amidst increased fears of a looming recession, with markets now awaiting more cues on US monetary policy from the FOMC December minutes.
USOIL – 4 hour chart
Crude oil markets were dealt a double whammy into the first session of the year after the International Monetary Fund warned of a potential global recession in 2023. Despite the uncertainty over rising COVID-19 cases in China, this certainly creates doubt about a recovery in oil demand. Oversupply concerns continue to cloud the market. Top oil exporter Saudi Arabia is expected to cut prices for its flagship Arab Light crude grade to Asia in February after suffering a 10-month low this month.
On the other hand, market traders fear that the US ISM manufacturing data will slow down. Moreover, a sustained rise in US interest rates could weigh on economic activity and potentially trigger a recession in 2023, a pessimistic scenario for crude demand. Therefore, the prospect of a recession that started wild downward swings in oil prices is expected to cause more downward pressure in the near term.
