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Crude Oil Prices Sink as Yield Curve Spurs Recession Fears

Crude Oil Prices Sink as Yield Curve Spurs Recession Fears

2019-08-14 16:19:00
Rich Dvorak, Analyst
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CRUDE OIL PRICES PLUNGE AMID YIELD CURVE INVERSION AS RECESSION FEARS RAGE

  • Crude oil prices plummet driven by latest economic data out of China and the Eurozone which rekindled recession fears as the 2s10s Treasury yield curve inverts
  • Oil demand prospects continue to dissipate amid slowing global GDP growth despite hopes of US-China trade war de-escalation following Trump’s tariff delay
  • Download the DailyFX Q3 Crude Oil Forecast for in-depth fundamental and technical outlook

Crude oil prices are dropping sharply again alongside risk assets which are coming under serious selling pressure following this morning’s inversion of the US Treasury yield curve. More disappointing economic data readings out of China and the Eurozone are providing investors with the latest bit of evidence that global GDP growth continues to slow which is stoking recession fears once again. Consequently, prospects for oil demand are getting crushed and is sending crude oil prices aggressively lower.

CRUDE OIL PRICE CHART: DAILY TIME FRAME (DECEMBER 20, 2018 TO AUGUST 14, 2019)

Crude oil price chart sinks as US Treasury yield curve inverts

Recent crude oil inventory data, which revealed a surprise build in stockpiles compared to an expected drawdown, is likely contributing to selling pressure as well. The dominant market theme of slowing global GDP growth – now encouraged further by today’s 2s10s yield curve inversion – continues to serve as a major headwind for oil demand and crude oil prices.

CRUDE OIL PRICE CHART: 30-MINUTE TIME FRAME (AUGUST 12, 2019 TO AUGUST 14, 2019)

Crude Oil price chart sinks as Recession Fears Trump US-China Trade War progress

With today’s whopping 4% drop in crude oil prices, the selloff is on pace to completely erase yesterday’s impressive gain sparked by news that US President Trump plans on delaying scheduled tariffs on China. Despite the apparent de-escalation, investor sentiment and risk appetite clearly remain damaged with ongoing US-China trade war uncertainty expected to continue weighing on global GDP growth – evidenced by collapsing sovereign interest rates and inverted yield curve. As such, pessimism surrounding crude oil prices and demand for the commodity are likely to persist. That said, the upside risk of OPEC intervention or hopes of monetary stimulus from central banks could send crude oil prices rebounding.

-- Written by Rich Dvorak, Junior Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insight

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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