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Oil prices fall for a second day amid concerns about an expected recession




Model oil barrels are seen in front of rising stock graphs in this illustration, July 24, 2022. REUTERS/Dado Ruvic/Illustration

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Sept 26 (Reuters) – Oil prices fell for a second day on Monday on fears of lower fuel demand from an expected global recession triggered by rising worldwide interest rates and as a rising U.S. dollar limits the ability of non-dollar consumers to buy crude.

Brent crude futures for November settlement were down $1.35, or 1.57%, at $84.80 a barrel by 0640 GMT. The contract fell to as low as $84.51, its lowest since January 14.

US West Texas Intermediate (WTI) crude oil futures for November delivery fell $1.15, or 1.46%, to $77.59 a barrel. WTI fell to as low as $77.21, its lowest since January 6.

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Both contracts fell around 5% on Friday.

The dollar index, which measures the greenback against a basket of major currencies, climbed to a 20-year high on Monday.

A stronger dollar tends to reduce demand for dollar-denominated oil since buyers using other currencies must spend more to buy crude oil.

Central banks in a number of oil-consuming countries, including the United States, the world’s biggest crude user, have raised interest rates to combat rising inflation, prompting concerns that the tightening could trigger an economic downturn.

“A backdrop of global monetary policy tightening by key central banks to curb rising inflation, and a stunning rally in the dollar against more than two-decade highs has fueled concerns of an economic slowdown and is acting as an important headwind for crude oil prices,” said Sugandha Sachdeva , Vice President of Commodity Research at Religare Broking.

Sachdeva expects WTI prices to find a floor of $75 a barrel, while for Brent, $80 will act as a cushion.

The disruption in the oil market from the war between Russia and Ukraine, with EU sanctions banning Russian crude due to start in December, has provided some support to prices.

The chief executive of energy trader Vitol, Russell Hardy, said fuel shipments are being affected by Russian oil products expected to flow to Asia and the Middle East while supplies from theirs go to Europe.

In addition, Hardy told an oil conference in Singapore that more than a million barrels per day (bpd) of US crude is expected to go to Europe to fill the gap in Russian supplies. read more

The head of Colombian state energy company Ecopetrol said at the same conference that it has sold more oil to Europe, replacing Russian supplies, while it sees increasing competition for market share in Asia. read more

Attention is turning to what the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, collectively known as OPEC+, can do when they meet on October 5, after agreeing to cut output modestly at their last meeting.

However, since OPEC+ is producing well below target output, an announced cut may not have a major impact on supply.

Data last week showed OPEC+ missed its target by 3.58 million bpd in August, a bigger shortfall than in July. read more

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Reporting by Mohi Narayan in New Delhi, Sonali Paul in Melbourne; Editing by Ana Nicolaci da Costa and Christian Schmollinger

Our standards: Thomson Reuters Trust Principles.



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