WTI dives to near $68.00 as hawkish central banks put global prospects in danger

• Investors are dumping oil as global recession fears have elevated.
• Hawkish guidance by global central banks is threatening the world economic outlook.
• A drawdown in oil inventories reported by US EIA has failed to provide support to the oil price.

West Texas Intermediate (WTI), futures on NYMEX, have plunged to near $68.00 as global central banks are consistently hiking interest rates to tame stubborn inflation. Soaring fears of a recession in the global economy are signaling a bleak demand outlook for oil.

Last week, the Federal Reserve (Fed) kept monetary policy steady but delivered hawkish guidance as the achievement of price stability has a long way to go. Contrary to that, the European Central Bank (ECB) hiked interest rates by 25 basis points (bps) to 4% as Eurozone’s inflation is thrice the required rate of 2%.

This week, the Bank of England (BoE) has unexpectedly raised interest rates by 50bps to 5% as inflationary pressures in the United Kingdom are getting beyond the control of BoE policymakers. Swift policy-tightening measures by central banks to bring down inflation are threatening global economic prospects as firms would restrict them from banking credit from financial institutions to avoid fat interest obligations.

Meanwhile, a drawdown in oil inventories reported by the United States Energy Information Administration (EIA) for the week ending June 16 has failed to provide support to the oil price. Last week, oil stockpiles show a decline of 3.831M while the street was anticipating a build-up of 0.33M.

Later, preliminary global S&P PMI numbers will be keenly watched, which will determine further demand for oil. It is worth noting that the United States economy has been reporting contraction consistently for the past seven months.