By Barani Krishnan
Investing.com — The oil rally may be nowhere near to over. But the astronomical month-after-month gains in crude prices have ended at least for now as recession worries led to double-digit losses in June for some longs in the game.
Crude prices were still poised to finish the second quarter up, with U.S. benchmark, the showing a 5% gain and global benchmark up about 1%. But for June, they were deeply in the red, with Brent down more than 11% at the time of writing and WTI off by over 7%.
It will be the first and biggest monthly drop since November’s loss of 16% for Brent and 20% for WTI.
In Thursday’s session, Brent’s most active contract, September, hovered at under $109 a barrel by 11:00 AM ET (15:00 GMT). That compared against last month’s close of $122.84 for Brent’s most-active month and $107.91 in March.
A barrel WTI was, meanwhile, below $106 — versus its close of $114.67 for May and $100.28 for March.
Thursday’s drop alone of nearly 4% weighed heavily on the two crude benchmarks as producer cartel OPEC+ and its allies confirmed a previously-agreed production of nearly 650,000 barrels per day for July and August — up more than 50% from June.
The Saudi-led and Russia-supported alliance of 23 oil producers said the higher output will be necessary to meet the spike in crude demand projected for the next two months, which are expected to see inordinately high road and air travel from people making up for two years of relative summer time inactivity forced by the coronavirus pandemic.
But the fear of a potential recession appeared to loom larger than OPEC’s demand outlook.
“There’s a strong likelihood of recession this year or next and investors are increasingly accepting that fate as well,” said Craig Erlam, analyst at online trading platform OANDA. “The prospect of a recession has created more two-way price action in recent weeks, preventing any unsustainable surges in the price of crude as China reopened and the OPEC+ deficit increased.”
An internal OPEC+ document, reported by newswires earlier this week, showed the alliance having trimmed its projected 2022 oil market surplus to 1 million barrels per day from a previous estimate of 1.4 million.