Oil prices made a slight recovery in the morning session of Asian trading hours on Wednesday after a sharp plunge by more than 10% last night over recession fears.
The international benchmark Brent crude closed on Tuesday at $102.77 per barrel, fell $10.73 or 9.45%. The West Texas Intermediate (WTI) fell below $100 mark to close at $99.50 per barrel, dropping $8.93 or 8.24% per barrel.
As of 10:40 local time in Thailand on Tuesday, Brent crude rose 0.83% to trade at $103.62 per barrel and WTI grew 0.18% to $99.68 per barre
The plummet in oil prices last night came amid growing concerns over recession that could trigger an economic slowdown, which would cut demand for petroleum products.
“In a recession scenario with rising unemployment, household and corporate bankruptcies, commodities would chase a falling cost curve as costs deflate and margins turn negative to drive supply curtailments,” Citi’s strategist wrote in a note to clients.
“Like then, so today high energy prices preceded the events that triggered a recession. Brent crude oil breached $140/bbl in Jul’08, equivalent to over $160/bbl in real terms, only to fall to $40/bbl by year-end before re-balancing at $90/bbl deferred and remaining there for the next four years,” Citi pointed out.
Citi said that oil prices could go to $60s if recession hit.
Amid bullish outlooks on oil prices from Goldman Sachs, JPMorgan and other major brokers predicted oil prices to go $140 or higher.
Goldman Sachs commented on the downturn of oil prices yesterday, saying that oil has overshot as global deficit remains unresolved.