Crude Oil Crashes Fear Of Recession

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What’s happening?

It is not common for analysts to agree on a price target for a commodity or a stock,
But this time around, the targets for crude oil vary in between the wide range of $65 a barrel and $380 a barrel.
Last week, global brokerage firm JPMorgan shocked everyone as its report estimated that global oil prices could reach a “stratospheric” $380 a barrel if US and European penalties prompt Russia to inflict retaliatory crude-output cuts.
And on Tuesday, Citigroup came out with a report saying that crude oil could collapse to $65 a barrel by the end of this year and slump to $45 by end-2023 if a demand-crippling recession hits the global economy.
“For oil, the historical evidence suggests that oil demand goes negative only in the worst global recessions.
But oil prices fall in all recessions to roughly the marginal cost,” Citi analysts said in a note.

Oil prices tumbled Tuesday with the US benchmark falling below $100 as recession fears grow,
Sparking fears that an economic slowdown will cut demand for petroleum products.

The plummeting price action comes as Saudi Arabia announced a price hike for all its crude grades in August to its prized market, Asia.
Saudi Arabia’s price hike comes mostly as expected by the market on strong refining margins and expectations of strong demand.
But while Saudi Arabia lifted the August price for its flagship crude grade to Asia, Arab Light, by $2.80 per barrel, the price of Brent and WTI crude fell sharply.
Saudi Arabia sets the pricing trend for most of the Middle Eastern oil exporters and is typically seen as a bellwether for the state of the oil market.

The world’s major economies including the United States are heading towards a “stagflationary debt crisis”, which may lead to the equity market crashing by around 50%,
Warned economist Nouriel Roubini, who is known as ‘Dr Doom’ for his forecast of the 2008 global recession.
The recession into which the US is likely to be plunged is worse than the previous financial crises,
As the country’s economy is currently showing symptoms akin to the stagflation crisis of the 1970s as well as the crippling recession which was seen in 2008.
While the US and global equities slide by around 35 percent in “plain-vanilla recessions”, the drop would be more severe in the upcoming financial crisis due to the combined effect of soaring inflation and debt crisis, Roubini claimed.
“Because the next recession will be both stagflationary and accompanied by a financial crisis, the crash in equity markets could be closer to 50 percent,” ‘Dr Doom’ wrote.

Most central banks and fiscal authorities around the world must admit their mistake of considering the current round of inflation as transitionary, the economist said.
Roubini further noted that a section of the analysts are “dangerously naive” in considering that the impending recession will be mild and short-lived.

Q) If the interest rate is decreased in an economy, it will?