Oil edges lower as slowdown concerns eat into OPEC-driven gains

Oil fell for a second day on concern that a global slowdown will sap demand, eroding gains made as OPEC+ last week announced an output cut.

West Texas Intermediate eased below $91 a barrel after losing 1.6% on Monday. JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon said the US and global economies are likely to sink into recession next year, while the International Monetary Fund and World Bank saw rising risks of a slowdown.

In China, the world’s largest crude importer, authorities are signalling that there’ll be no let up in the nation’s Covid Zero policy, potentially acting as a brake on energy demand. The approach is sustainable and the country must stick to it as it is key to stabilizing the economy and protecting lives, the Communist Party’s flagship newspaper said in a commentary Tuesday.

Oil hit the lowest level since January last month as slowdown concerns gathered force, only to rebound after the Organization of Petroleum Exporting Countries and its allies responded by reducing production. Investors are gauging the impact of higher interest rates as central banks including the Federal Reserve fight inflation, as well as disruptions caused by the war in Ukraine and the outlook for global supply heading into the northern-hemisphere winter.

“What OPEC+ did will put a floor under prices as they’ve demonstrated their will to support prices,” said Sean Lim, a Malaysia-based oil-and-gas analyst at RHB Investment Bank Bhd. Still, “recession risks will remain the talk for now,” he added, lowering his fourth-quarter Brent forecast to $98 from $105.

Widely-watched time spreads continue to signal increased market tightness, however. The difference between Brent’s nearest two December contracts was $12.95 a barrel in backwardation, compared with about $9 a month ago.