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by Stockwatch Business Reporter
West Texas Intermediate crude for August delivery lost $1.92 to $104.27 on the New York Merc, while Brent for August lost $1.69 to $110.05 (all figures in this para U.S.). Western Canadian Select traded at a discount of $17.75 to WTI, up from a discount of $18.35. Natural gas for July lost 62 cents to $6.24. The TSX energy index lost 15.97 points to close at 214.73.
Oil prices had another down day, on concerns that steep increases in interest rates could spark a global recession and lead to decreased fuel demand. U.S. Federal Reserve chairman Jerome Powell told a Senate banking committee yesterday that a recession, while not a goal, is "certainly a possibility" as the Fed tries to curb inflation. He said the Fed would need to see months of "compelling evidence" of slowing inflation before it eases up on its aggressive recent rate hikes.
Oil bulls remain undeterred. "The financial, paper market is plunging, but the physical market remains undeniably strong," declared RBC analyst Michael Tran in a recent research note. Noting the recent drop in WTI prices (down to $104 (U.S.) from $120 (U.S.) in just 10 days), he wondered rhetorically, "What has changed fundamental-wise?" before answering his own question, "Not much, nada, zilch." He blamed bearish "sentiment" in a market that is overly worried about "demand destruction." Yet demand is still strong, and supplies are still tight. "Further dips [in oil prices] are likely to be ferociously defended," he predicted. He wrote that yesterday. Prices promptly dipped today, though in fairness to Mr. Tran, he seemed to be referring to dips below $100 (U.S.).
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