- Oil remained resilient in Asian trading as traders focused on renewed demand from the region which is progressively opening up to travelers.
- Continued supply disruption from the ongoing war in Ukraine likely to have more of an impact than the prospect of a recession in the U.S. from central bank policy tightening.
After a dive of 7% the past Friday, oil has regained its footing in Asia with traders considering the possibility of greater short-term demand as more economies in the region open up to travel, overshadowing concerns that U.S. monetary tightening and fears of an impending recession.
West Texas Intermediate (WTI) traded north of US$109 a barrel, with ‘worry’ being the pervasive sentiment amidst fears of the Fed raising rates which will derange the financial markets.
Oil prices skyrocketed this year stemming from the war on Ukraine, disrupting supplies just after a surge in consumption as pandemic restrictions get lifted. Notwithstanding the turbulence of the market after the recent Fed hike, high oil prices are likely here to stay if the war persists and keeps Russian crude off global markets.
Moreover, the oil market is currently parked in backwardation (where short-term prices trade higher than longer-dated ones), suggesting tight supplies, but expectations that in the long-term, either a recession will dent demand, or Russian supply rejoins global markets.
