Global commodity price crash might benefit your pockets but recession fear mounts

Commodity prices are at multi-year lows as fears of a global recession continue to cloud the outlook on demand. It’s the third straight day that crude oil prices have declined and it’s below $100 per barrel. Prices of aluminium, palm oil, and metals such as gold, silver, aluminium are all on a decline.

Gold prices are trading at a 10-month low after the US Fed meeting minutes showed that there was an agreement among policymakers on hiking rates further and the dollar index was at a 20-year high.

Now, the crude crash is good news for oil-importing countries like India and has led to a stock rally in state-owned refiners such as Indian Oil Corporation (IOC), Bharat Petroleum Corporation, and Hindustan Petroleum Corporation (HPCL).

Brent crude futures fell 71 cents to $99.98 a barrel by 00:13 GMT. WTI crude futures fell 62 cents to $97.91 a barrel.

The declines follow a dramatic fall on Tuesday. WTI slid 8 percent while Brent tumbled 9 percent, a $10.73 drop that was the third biggest for the contract since it started trading in 1988.

The head of the International Monetary Fund (IMF) on Wednesday said the outlook for the global economy had "darkened significantly" since April and she could not rule out a possible global recession next year given the elevated risks.

The current commodities prices mark a sharp turnaround from fierce rallies in the space earlier in 2022 when raw material prices were pushed higher by a post-pandemic bounceback.

"Recession fears continue to grow and that obviously does raise some concerns for the demand outlook," Warren Patterson, ING's head of commodity research, told Reuters adding, "However, supportive fundamentals should mean that further downside is relatively limited."

As per a Reuters report, India's palm oil imports in July are set to jump to the highest in 10 months because of a hefty correction in prices. This, in turn, should bring down prices of products that use palm oil as a raw product.

"The palm oil prices have corrected by 45-50 percent. If we look at the prices in February and March, they were hovering around $1,500-1,600 a tonne and now they have come down crashing to close to around $1,000," Sameer Shah, Chief Financial Officer. Godrej Consumer Products, told CNBC-TV18.