International oil prices plunged 10%, global recession alarm sounded?

International oil prices have suffered another heavy setback
.

As of the close of trading on the 5th, the price of light crude oil futures for August delivery on the New York Mercantile Exchange fell below the $100 mark, closing at $99.
50 per barrel; the price of London Brent crude oil futures for September delivery fell $10.
73 to close at $
102.
77 per barrel.
Both oils fell by more than 10%
in the day.

Why did the international oil price plunge and the industry winter is coming?

Recession fears loom over the market

The collapse in international oil prices is closely related
to fears of a global recession.

As inflation data continues to be high, pressure on central banks to raise interest rates has doubled
.
Since July, the Federal Reserve and the European Central Bank have repeatedly sent hawkish signals, which has led to a sharp increase in investor panic about recessions in major economies
.

On July 5, local time, the Bank of England warned that the outlook for the UK and the global economy has "seriously deteriorated"
.
Energy and fuel costs are rising rapidly around the world, making the cost of living generally rising faster
.

At the same time, energy tensions have exacerbated market unease
.
Since the beginning of 2021, European gas prices have reportedly risen by about 700%.

The latest quarterly report on the natural gas market released by the International Energy Agency shows that global gas consumption will decline slightly this year and slowly increase
in the following years due to soaring prices and the possibility of further reductions in natural gas supply in major countries.

The British Centre for Economic and Business Research recently released a report that due to the reduction in natural gas supplies from major producing countries, the risk of recession in Europe has risen sharply, and the probability of a recession in Europe this winter has reached 40%.

As a result of the above, recession fears intensified, and demand for safe-haven assets contributed to the strengthening of the US dollar, and the US dollar index rose to a 20-year high
on the day.
Oil prices are under significant pressure
due to rising purchase costs and reduced investment attractiveness for commodities denominated in US dollars.

Economic expectations are not optimistic

In fact, given the repeated impact of the pandemic and geopolitical tensions, the risk of a global market recession has long been apparent
.

Since the beginning of this year, problems such as rising global inflation, falling real wages, energy crisis, and food shortage have continued to emerge.

To this end, the United Nations, the International Monetary Fund (IMF), the World Bank, the OECD and others have all lowered their global economic growth forecasts in their latest forecasts
.

Growth expectations for several economies have also undergone revaluation
.
The IMF recently sharply cut its U.
S.
economic growth forecasts
.
The IMF said it now expects U.
S.
GDP to grow 2.
9 percent in 2022, down from its 3.
7 percent forecast
in April.
The IMF also lowered its U.
S.
economic growth forecast for 2023 to 1.
7 percent from 2.
3 percent and expects U.
S.
growth to be as low as 0.
8 percent
in 2024.

According to a research report released by Nomura Holdings, in addition to the United States, the euro area, the United Kingdom, Japan, South Korea, Australia and Canada are also expected to fall into recession
.

France lowered its GDP growth target for 2022 to 2.
5%, compared with 4%
expected in the previous budget.

The Institute for Macroeconomic and Economic Situation (IMK) lowered its GDP growth forecast for 2022 from 2.
1% to 1.
9% and its growth forecast for 2023 from 3.
2% to 2.
6%.

When will international oil prices regain lost ground?

International oil prices have plunged frequently recently as investors panic about the global recession
.
After many shocks, when will oil prices recover their lost ground and make a comeback?

Han Zhengji, an analyst at Jinlianchuang crude oil, pointed out that with the macro-level recession and the expectation of interest rate hikes and tightening liquidity, investors' bullish sentiment on the crude oil market has gradually faded
.
In the long run, if countries continue the current monetary tightening, the amount of money available for investment and speculation will continue to decrease, and the slowdown in the global economy will affect the growth of energy demand, and the fall of commodity prices from high levels will become inevitable
.
Taking light crude as an example, the mainstream price range in July is likely to remain between
$95 and $110 per barrel.

Bank of America Global Research (BofA Global Research) recently said that the average oil price of Brent is expected to be around $102 per barrel this year and next, while emphasizing that if European and American sanctions cause oil production to fall below 9 million barrels per day, oil prices may soar to $150 per barrel
.

Bank of America believes that even in the event of a recession, the average Brent price in 2023 will exceed $75 per barrel; In addition, even if the downside risk to crude oil spot prices increases in the short term, sanctions will provide a "guarantee" effect
.

The analysis believes that although the current oil price has experienced some ups and downs, the high operation is difficult to change
.
At present, it is the peak season of global crude oil consumption, and demand will gradually rise; In the long run, the tight supply of crude oil will still intensify, and the probability of a sustained plunge in oil prices is unlikely, and it is expected to recover lost ground
without waiting for a long time.