Commodities are also pressured by a stronger dollar as the USD index jumped to fresh multi-year tops
Oil prices tumbled on Tuesday amid rising worries about a global recession. Brent crude gave up more than 10% in the biggest daily drop since March. The futures barely hold above $100 a barrel before bouncing marginally. On Wednesday, oil prices rose in early deals but encountered renewed selling pressure, treading water just above $103 in late Asian deals.
As the incoming economic updates continue to signal weakness and major central banks tighten their policy aggressively, worries about a possible recession keep weighing on global markets, including oil and other commodities. Of note, gold prices saw a sell-off that took the prices to fresh 2022 lows around $1,763, with downside pressure persisting on Wednesday, suggesting there is room for further losses in the short-term. Commodities are also pressured by a stronger dollar as the USD index jumped to fresh multi-year tops around 106.80 before retreating marginally.
However, the recent rout in the oil market looks like a short-lived correction within a broader bullish trend that remains intact for the time being as supply concerns are still there, with market staying tight. Still, Brent crude could struggle in the very near term as recession fears returned to the fore, pressuring riskier assets in general.
Technically, the futures could derail the $100 mark if sellers reemerge any time soon. In this scenario, the April low of $97.50 will come into the market focus next. On the upside, Brent needs to settle above $105 a barrel in order to regain the $107 zone that capped the bearish pressure last month. The $100 mark remains in the market focus while below $110. In the longer run, should the global economy fall into recession, oil prices may tumble below $70 a barrel.