• The oil prices are trading in a 60-pips range in early Tokyo.
• Policy tightening by the Western leaders has triggered recession fears in the world economy.
• China has increased its oil imports from Russia significantly.

West Texas Intermediate (WTI), futures on NYMEX, is juggling in a narrow range of $108.25-108.85 in the Asian session. The black gold is not performing well after the world central banks started elevating their interest rates vigorously due to intense price pressures. To tame the galloping inflation, it looks like a rate hike by 50 basis points (bps) is the new normal. Various central banks have sounded hawkish and the mighty Federal Reserve (Fed) went beyond the paragraph and announced a rate hike by 75 bps.

The higher extent of rate hikes by the central banks is opening doors for a recession in the world economy. Higher interest rates will squeeze liquidity from the market and the corporate sector will leave with lower capital and that too is an expensive one. This will force the corporate to invest in projects with more filters due to the unavailability of helicopter money. Eventually, the aggregate demand will witness a major slump and therefore the oil demand will fall significantly.

On the supply side, supply constraints will continue to remain steady as gauging an alternate for oil imports from Russia is not a cakewalk. Many economies have decided to prohibit oil from Russia despite naming the alternate oil suppliers to address the required demand.

Meanwhile, oil imports in China from Russia have soared dramatically. The economy has recorded a 55% addition in the oil imports in May.