CRANBURY, N.J. (DTN) -- Nearest delivered oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange are trading below their 100-day moving averages in mixed activity early Wednesday following Tuesday's steep selloff triggered by growing concern over lost oil demand as the global economy slows with indicators in the United States suggesting the country might already be in recession.
Worry over lost demand outmuscled news of lower production from Norway as a workers' action has forced Equinor to shut-in 89,000 bbl of oil equivalent per day of offshore production at three fields in a three-phase rollout of the strike this week. Equinor said another 333,000 boe/d of oil equivalent will be shut-in today as four more fields are shut-in, with 264,000 boe/d of the output natural gas. More shut-ins could take place on Saturday (7/9).
Ongoing protests in Libya have led to force majeure at five terminals and an oil field, with Libya's National Oil Company last estimating the Organization of the Petroleum Exporting Country's oil exports have fallen to between 365,000 and 409,000 bpd from more than 1 million bpd earlier this year. More oil from the north African country could be shut-in as protests grow between two warring parties over the presidency.
Also bullish are curbs and higher taxes on India's diesel and gasoline exports. New Delhi has taken the action to shore up domestic supply, but the loss of exports from their refiners will tighten global supply.
Also, late Tuesday a Russian court, citing violations of a spill prevention plan, ordered the Caspian Pipeline Consortium to halt oil loadings in the Black Sea for 30 days, according to Bloomberg. There are three moorings at the CPC terminal with the equivalent of loading as much as 953,000 bpd of oil.
As of Monday, about 90% of Ecuador's oil production or 461,637 bpd recovered after two weeks of protests, Reuters, citing the country's ministry of mines and energy, reported. The nationwide protests, which ended after the government reached an agreement with demonstrators, are estimated to have caused a loss of 1.99 million bbl of oil output.
Reuters also reported China is allowing refiners to export more oil products which will allow refiners to capture strong margins, while also boosting global oil supply availability. Beijing's zero-COVID policy through much of the second quarter limited domestic fuel demand. Reports suggest some eastern cities in China are under COVID lockdowns following an outbreak of the virus there.
Additionally, Italy and Spain are again buying oil from Venezuela after two years of no oil exports from the sanctioned OPEC member to Europe, according to Reuters. Washington eased sanctions on Venezuela to help offset lost supply from Russia as Western nations take action against Moscow for its invasion of Ukraine.
Inflation pressure felt in the United States, Eurozone, the United Kingdom, South Korea, Australia, not to mention the harmful consequences of spiking commodity prices and food shortages are having on emerging economies is increasingly the focus of the oil market. After a first quarter contraction in the United States, the Federal Reserve Bank of Atlanta's GDPNow tracker indicated a 2.1% contraction in the second quarter, meaning the U.S. economy is in recession. That possibility is occurring just as the Federal Reserve embarks on an aggressive path of rate increases to fight inflation, with June's 75-point hike in the federal funds rate expected to be repeated by the Federal Open Market Committee when they meet next on July 26-27.
Many critics of the Fed said the central bank was late to combat inflation, which is now sitting at a 40-year high and broadening, threatening a "hard landing." The Atlanta Fed's GDPNow tracker might prove ominous, as the Fed lifts rates.
Such foreboding is already being felt by a growing segment of the U.S. population, with University of Michigan's Consumer Sentiment Survey finding sentiment at a record low in June. The survey began in 1946.
This week, Monmouth University Polling Institute found nearly half of the public finds that inflation, 33%, or gasoline prices, 15%, are the biggest concern facing their families now.
"More than 4 in 10 Americans (42%) say they are struggling to remain where they are financially," said the university. "This is the first time since Monmouth started asking the question five years ago that the number topped 3 in 10 – the range in prior polls was 20% to 29%."
Moreover, 57% indicate actions taken by the federal government over the past six months have hurt their family, with only 8% saying the government has helped them. It's the first time in the poll most of the public has had a negative sentiment toward the federal government.
"The state of the economy has Americans in a foul mood. They are not happy with Washington," said Patrick Murray, director of the independent Monmouth University Polling Institute.
In early trading, NYMEX August West Texas Intermediate futures are up $0.75 from a 10-week low spot settlement to $100.25 bbl, and ICE August Brent is $1.58 higher near $104.5 bbl after falling to a 13-week low settlement on the spot continuous chart Tuesday. NYMEX August RBOB futures moved off a 10-week low spot settlement to $3.36 gallon, up about 3.2 cents, while August ULSD futures are down about 3.25 cents from a 13-week low spot settlement on Tuesday to $3.5710 gallon.
The U.S. dollar index is continuing a rally, up 0.45% to a fresh 20-year high at $106.790 in early trading.
Brian L. Milne can be reached at firstname.lastname@example.org