OIL FUTURES: Crude edges lower as hot inflation, rising unemployment prompt recession fears

Crude oil futures finished lower July 14 amid broad recession concerns fueled by rising inflation and unemployment figures.

NYMEX August WTI declined 52 cents to $95.78/b, and ICE September Brent finished down 47 cents at $99.10/b.

Crude prices had been testing five-month lows in early New York trading after US Bureau of Labor Statistics data showed the US producer price index climbed 1.1% in June. The reading, which came in just below the record high 11.6% seen in March, shows wholesale prices increased 11.3% from last June and exacerbated already-high inflation concerns following a July 13 Consumer Price Index print of 9.1% for June.

Further adding to bearish sentiment, US unemployment filings reached 244,000 in the week to July 9 and were at the highest level since November 2021.

"Recession fears have fully gripped the markets and central banks are left with little alternative but to tighten aggressively into it," OANDA senior market analyst Craig Erlam said in a note.

NYMEX August RBOB settled 4.69 cents lower at $3.1868/gal and August ULSD fell 1.65 cents to $3.6494/gal.

The hot inflation reports have prompted some market analysts to expect the US Federal Reserve to be more aggressive with rate hikes in the upcoming Federal Open Market Committee meeting on July 26-27 and potentially raise rates up to 100 basis points.

But sentiment improved after US Federal Reserve Governor Christopher Waller downplayed these risks, stating, according to media reports, that a 75 basis-point hike is "huge," and warning: "You don't want to really overdo the rate hikes."

In midmorning New York trading, the market was pricing in an 85% chance of a 100 basis point interest-rate hike at the Fed's July meeting, according to the CME's FedWatch Tool. However, but the end of the session this probability had fallen to 44%.

The International Energy Agency on July 13 lowered its oil demand growth estimates for 2022 and 2023, citing a "deteriorating" economic environment, with particular weakness in road fuels and petrochemical demand.

In its monthly oil market report, the IEA highlighted weaker-than-expect demand from the US summer driving season and reduced its demand growth estimates by 100,000 b/d for both years to 1.7 million b/d and 2.1 million b/d, respectively.