WTI extends its losses below $109.00 on soaring recession fears

• The oil prices have recorded more losses after violating the critical support of $109.00.
• Renewed recession fears about hiking interest rates have brought a sell-off in the oil prices.
• Investors have ignored the supply constraints in the oil market.

West Texas Intermediate (WTI), futures on NYMEX, has extended its losses in the Asian session after slipping below the crucial support of $109.00. The oil prices have delivered a downside break of the consolidation formed in a narrow range of $108.79-110.00. The black gold is expected to extend its losses further after slipping below Monday’s low at $106.78.

Fears of recession in the Western countries are galloping as higher inflation rates are demanding tight quantitative policy measures. Various central banks have elevated their interest rates in June significantly. Things got worsened further when the Swiss National Bank (SNB) elevated its interest rates for the first time in the past 15 years. The SNB paddled up its interest rates by 50 basis points (bps). It looks like the SNB has understood that higher oil and food prices could also affect their economy in later stages. Therefore, a balanced rate hike measure is for the greater good.

Higher interest rates are stating a sheer liquidity squeeze from the market and eventually a steep fall in the aggregate demand, which will bring a decent slippage in the demand for oil.

Meanwhile, investors have ignored the expectations of a rise in the summer season demand in the US. Also, tight supply in the oil market has failed to support the oil prices. The embargo on Russian oil imports will have multiplier effects on the oil prices for a prolonged period. Going forward, Federal  Reserve (Fed) chair Jerome Powell’s testimony will remain in focus. Fed Powell is expected t sound hawkish on further guidance, which could bolster the recession signs further.