Oil and gas prices fall sharply amid European recession fears

The price of Brent crude fell by $1.63, or just below 2%, to $88.20 a barrel, while the spot price for European gas slid by 4.5%

Tue, 24 Oct, 2023 - 19:19

The prices of global crude oil and European wholesale gas slid for the third straight session, after a flurry of slow economic data across Europe weighed on the outlook for energy demand.

The price of Brent crude fell by $1.63, or just below 2%, to $88.20 a barrel, while the spot price for European gas slid by 4.5%.

Data for the eurozone-wide economy took a surprise downward turn this month, while the German readings suggesting a recession is under way, and Britain's businesses reported another monthly decline in activity.

The data come ahead of rate-setting decisions by the European Central Bank (ECB), which is meeting in Athens on Thursday, and by the Bank of England, whose rate-setting committee meets a week later.

Inflation in major economies is likely to slow markedly by the end of next year, according to Capital Economics.

"And with weak activity taking some of the steam out of labour markets and inflation, we are growing more confident in our view that the Fed, ECB and Bank of England are done hiking policy rates," said Ariane Curtis, global economist at Capital Economics.

"Meanwhile, the forward-looking components of the surveys suggest that worse is still to come, especially in Europe," she said in a commentary.

In contrast to Europe, US data showed business output ticked higher in October as manufacturing pulled out of a five-month contraction.

The relative strength of the US economy helped lift the dollar.

The International Energy Agency said it expected fossil fuel demand to peak by 2030 based on governments' current policies.

Earlier this week, crude oil prices had fallen more than 2% as diplomatic efforts in the Middle East, the world's biggest oil-supplying region, intensified to contain the conflict between Israel and Hamas.

Julius Baer analyst Norbert Ruecker said that the risk premium inherent to oil prices should disappear within weeks, adding it sees prices heading lower into next year.

European wholesale gas prices fell sharply, in particular, after the European economic data.

The price for gas for delivery in November fell 4.5% to below €49 per megawatt hour late in the session, while the January contract was also down sharply, by almost 5.5%.

Any sharp economic slowdown in economies across Europe implies that demand for the key fuel that generates large amounts of electricity would fall, at a time when gas storage facilities across the continent are almost full.