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Oil: The 'R'-Word Rules as U.S. Crude Below $80 for Worst Week in 7

Commodities Sep 23, 2022 03:02PM ET
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By Barani Krishnan 

Investing.com - It's back, the buzzword most hated by oil longs.

Recession, or the 'R'-word as it has come to be known, was omnipotent across commodity markets on Friday, sending gold to 2½-year lows while setting up 'black gold', or oil, for its worst weekly loss in seven as U.S. crude broke below $80 per barrel the first time since January.

Global equities at a two-year low, the dollar at 20-year highs, weak European purchasing managers indexes, and growth concerns from this week's rate hikes by the Federal Reserve to the Bank of England made it a perfect storm for oil bulls.

"The market is clearly thinking economic slowdown," said Scott Shelton, energy futures broker at ICAP in Durham, North Carolina.

"Whether or not physical [oil] grades are strong or weak matters not currently," Shelton added.

Long-leaning analysts have warned that risk of war escalation in Ukraine by Russia and China's opening up from COVID lockdowns could mean plenty of upside for oil in the coming weeks.

New York-traded West Texas Intermediate, which serves as the U.S. crude benchmark, settled at $78.74 per barrel, down $4.75, or 5.7%, on the day. The so-called WTI earlier hit a session low of $78.14.

For the week, the U.S. crude benchmark was down 7.5% for its worst week since the end of July.

“WTI is inching closer to the 100-Week SMA of $77.50 with today's low of $78.14,” Sunil Kumar Dixit, chief technical strategist at SKCharting.com, said, referring to U.S. crude’s  Simple Moving Average. “Some additional drop beyond the support is not ruled out.”

Brent, the London-traded global benchmark for oil, settled at $86.15, down $4.31, or 4.8% on the day, after an intraday drop to $85.51. 

For the week, Brent was down 5.7% for its biggest weekly decline since the end of August.

"Central banks now appear to accept that a recession is the price to pay for getting a grip on inflation, which could weigh on demand next year," said Craig Erlam, analyst at online trading platform OANDA.

"At the same time, the market still remains tight and OPEC+ is perfectly willing to restrict supply further even as it fails to deliver on quotas it has set itself so far. What's more, a nuclear deal between the US and Iran looks no closer and Russia's mobilization could pose a risk to its supply."

Considering all these, "very little is probably priced in at this point," Erlam added.

The European Union ratcheted up, on Thursday, its plans to put a cap on the price of Russian oil -- a measure aimed at weakening Moscow's ability to fund the war in Ukraine.

Nigeria's Oil Minister Timipre Marlin Sylva, speaking on behalf of producer alliance OPEC+, meanwhile, threatened a cut in global crude output if prices continued to fall.

Neither announcement made much of an impact on the market.

Oil: The 'R'-Word Rules as U.S. Crude Below $80 for Worst Week in 7
 

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Comments (14)
Joe Fred
Joe Fred Sep 25, 2022 10:48PM ET
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We will see if the Davos crowd and west can continue to control everything via financially or if commodities take over control of things once winter comes and Putin then has some stroke with his commodities (oil and gas). Either way change is coming as we will continue to need the commodities and price manipulation can only get you so far until the need for these commodities outpaces the supply due to lack of investment as eventually people will need the energy.
Kerry Ditto
Kerry Ditto Sep 23, 2022 4:03PM ET
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This is an era of E-revolution for E-commerce and Electric vehicles. Oil prices will fall.
António Carlos Galhano
António Carlos Galhano Sep 23, 2022 3:50PM ET
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And where are those who predicted oil prices at 120 and some even at 150? Where have these well-informed analysts gotten themselves?
Kerry Ditto
Kerry Ditto Sep 23, 2022 3:42PM ET
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The E-words are Electric vehicles and E-commerce.
Kerry Ditto
Kerry Ditto Sep 23, 2022 3:37PM ET
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It's E word to tank oil prices. This decade will be for new industrial revolution of EV era. To be the best decade for stock market.
Alan Rice
Alan Rice Sep 23, 2022 1:10PM ET
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Oops !! (Brent Price : wrong way) Try again ??
EL LA
EL LA Sep 23, 2022 1:10PM ET
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Hahaha! It's true! The price only goes down. Good thing the US producers didn't invest in more exploration and production. They would be so sorry now! it was better to keep the wallets snapped shut. The price is no longer high enough for investing in E&P and look at how quickly it crashed from April! Whew! That was fast!
ge Kret
ge Kret Sep 23, 2022 1:00PM ET
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Oil touches everything on the planet! This is one of the best buying opportunities this year!
Alan Rice
Alan Rice Sep 23, 2022 1:00PM ET
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It does !! Just look at the birds that used to live in Valdez, Alaska. (Yeah, there aren't any.)
znao sam
znao sam Sep 23, 2022 12:46PM ET
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recession, another word for manipulation
EL LA
EL LA Sep 23, 2022 12:01PM ET
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Haven't you heard? There are no more oil longs. Oil is in the dumpster. The only things rising to great heights are coal, the USD, and lithium. Meet the new boss. Not like the old boss at all.
Stoyan Trifonov
D1I1I Sep 23, 2022 12:01PM ET
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2023 free oil for everyone, oops but there none left.
 
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