Recession risks and the Fed are weighing on oil prices and pose a threat to OPEC, RBC's Helima Croft says

The risk of a recession is weighing on oil prices, according to RBC's Helima Croft.
That's posing a risk to OPEC, which recently slashed production to raise crude prices.
Croft said the cartel could slash production later in the year, predicting a rebound in oil in the second-half.

The risk of a recession in the US and the Federal Reserve are weighing on oil prices, which are posing a threat to OPEC nations, according to RBC's global head of commodity strategy Helima Croft.

"I don't think it's other producers that are the threat to OPEC, I think it's more Jerome Powell is the threat to OPEC; concerns about recession are the threat to OPEC," Croft said in an interview with CNBC on Tuesday, referring to growing fear of a downturn in the US thanks to the Fed's aggressive rate hikes.

Central bankers have hiked rates sharply in the past year to lower inflation, though interest rates that high threaten to overtighten the economy into a recession, economists warn.

The risk of a downturn has weighed heavily on oil prices, with West Texas Intermediate and Brent crude recently hitting their lowest levels since December 2021. That spells trouble for OPEC nations, which recently announced an unexpected 1 million barrel a day production cut to buoy oil prices and ensure stability in energy markets.

The cartel's production cuts still have a significant impact on global energy markets, with crude prices jumping 8% after the cuts were initially announced.

"The question is, who's going to win out? Is it going to be the princes, or Powell in terms of the market?" Croft said, referring to Saudi Arabia, the founding member and top oil producer of OPEC.

Tensions between OPEC and the US have been rising since the cartel slashed production by 2 million barrels a day in mid-2022, snubbing President Biden's plea to keep oil prices stable as US inflation continued to soar. Supply cuts were necessary to control "dysfunction" in the energy market, Saudi Arabia previously said, claiming that oil prices were disconnected from fundamentals.

Croft speculated OPEC would continue to "stay active" in controlling energy markets, and could slash production again later this year. She predicted oil prices could rise in the second half of the year, particularly if global oil demand ramps up due to China's reopening and markets heading into colder seasons.

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