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Crude Oil Slumps to Lowest Levels This Year on Recession Fears

Commodities Sep 23, 2022 09:18AM ET
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By Peter Nurse   

Investing.com -- Oil prices slumped Friday, falling to the lowest levels this year, weighed by heightened recession fears, which would curb global demand, as well as a surging dollar.

By 09:20 ET (13:20 GMT), U.S. crude futures traded 4.6% lower at $79.67 a barrel, while the Brent contract fell 3.8% to $87.01. 

The two benchmarks were down 5.1% and 3.7% respectively over the course of this week, heading for their fourth consecutive weekly loss.

The market has been hit hard by aggressive monetary tightening by a number of central banks, led by the U.S. Federal Reserve, as they tried to control inflation running at historic highs.

The Fed policymakers made it clear they were prepared to tolerate a U.S. recession in order to curb soaring prices, and this view seems to be the prevailing one at the likes of the European Central Bank and the Bank of England.

Adding to the difficulties the crude market is facing is the strength of the U.S. currency, with the dollar index reaching its highest level in two decades, as this makes the commodity more expensive for foreign buyers.

“With expectations of only further monetary tightening in the months ahead, commodity markets are likely to face some strong headwinds,” analysts at ING said, in a note. “The dominance of the USD at the moment will only add to these headwinds.”

These factors have overshadowed the concerns that Russia’s escalation of the war in Ukraine, by announcing the biggest mobilization of forces since World War Two, will further limit supply from this major supplier of crude.

EU member states are expected to meet over the weekend to discuss pushing ahead with a price cap on Russian oil, in an attempt to come to a preliminary agreement by early October, ahead of an EU leaders’ meeting. 

“Getting all members to agree on a price cap could prove difficult, just like we saw with the EU ban on Russian oil, which was watered down to include only seaborne trade,” ING added. “EU members will want to come to a final decision by 5 December, which is when the ban on Russian seaborne crude into the EU comes into force.”

Additionally, the threat that OPEC and its allies may cut production when they next meet in early October, after making a symbolic cut in its oil output target of 100,000 barrels per day last time, is having little impact. 

The bloc is already producing more than 3.5 million barrels a day less than its official output quotas.

The Baker Hughes rig count and the CFTC’s positioning data round off the week later in the session.

Crude Oil Slumps to Lowest Levels This Year on Recession Fears
 

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Comments (8)
Brad Albright
Brad Albright Sep 24, 2022 9:45AM ET
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Kudos to the Biden administration for getting prices moving in the right direction.
Andrew Ulferts
Andrew Ulferts Sep 24, 2022 9:45AM ET
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At the expense of the entire economy. Election incoming. I’ll definately guve him credit for that. Don’t worry, lots of new poll watchers to make sure it’s free and fair.
First Last
First Last Sep 23, 2022 11:18AM ET
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Lower oil prices!  Retrumplicans were blaming Biden (instead of Putin) when prices were increasing, but so quiet now.
Andrew Ulferts
Andrew Ulferts Sep 23, 2022 11:18AM ET
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Election time is coming. We’ll see how smart it was to crush the economy to lower oil prices.
First Last
First Last Sep 23, 2022 11:18AM ET
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Andrew Ulferts   Putin crushed the world's economies by limiting energy/food supply and raising energy/food prices/inflation.
FMGK Blue
FMGK Blue Sep 23, 2022 10:47AM ET
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This is not recession fear. This is liquidation of everything for USD. Cash is king. Not because of rates or the FED... because of Putin and his nukes.
Jaspreet Singh
Jaspreet Singh Sep 23, 2022 10:43AM ET
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strongly buy
hiiah Huuah
hiiah Huuah Sep 23, 2022 10:39AM ET
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Bs and some more bs
First Last
First Last Sep 23, 2022 10:39AM ET
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Yeah.  That's why we need more fact-checking in the comments.
Andrew Ulferts
Andrew Ulferts Sep 23, 2022 9:59AM ET
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Quad witching week! Opex day. Shorting oil will not spur new investment in the sector, but discourage it. And that’s going to make things worse.
EL LA
EL LA Sep 23, 2022 9:59AM ET
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Don't worry. They have lots of dollars for windmills that ****birds and solar panels that are piling up at dump sites and batteries that ******up and start fires in garages and on highways.
First Last
First Last Sep 23, 2022 9:59AM ET
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EL LA   And according to Trump, windmills cause cancer and devalue his properties.
EL LA
EL LA Sep 23, 2022 9:49AM ET
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OPEC+ should have cut production months ago.
First Last
First Last Sep 23, 2022 9:49AM ET
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Russia, the "+", did cut export.
John Dislias
HephaestusTrades Sep 23, 2022 9:47AM ET
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Lol , ridiculous decline , stop loss trimming . Oil next pt is $90 . There is not lower demand and more supply but the oposite! As the decline made today the same is going to be the uptrend reaction to $90
Riaz Ebrahim
Riaz Ebrahim Sep 23, 2022 9:47AM ET
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TRUE ********MANIPULATION AND STOP LOSS TRIMMING/PROFIT TAKING
 
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