Oil prices fall to lowest since pre-invasion of Ukraine as recession fears weigh

FILE PHOTO – A PetroChina worker inspects a pump jack at an oil field in Tacheng, Xinjiang Uighur Autonomous Region, China June 27, 2018. REUTERS/Stringer AT

LONDON/NEW YORK, Aug 4 (Reuters) – Global oil prices fell on Thursday to their lowest levels since before Russia’s February invasion of Ukraine, as traders worried about the possibility of an economic recession later this year that could torpedo energy demand.

Benchmark Brent crude futures fell more than 3% to $93.81 a barrel after hitting a mid-session low of $93.20, the lowest since February 21. West Texas Intermediate (WTI) crude futures fell 2.7% to $88.21 after hitting their lowest since February. 3 for $87.97.

The fall in oil prices may come as a relief to big consumer nations such as the United States and countries in Europe that have urged producers to increase output to compensate for tight supplies and fight rampant inflation.

Oil had risen to well above $120 a barrel earlier in the year after a sudden surge in demand from the darkest days of the COVID-19 pandemic combined with supply disruptions from sanctions against major producer Russia over its invasion of Ukraine.

Thursday’s sell-off followed an unexpected rise in US crude inventories last week. Gasoline stocks, a proxy for demand, also showed a surprise rise as demand eased under the weight of gas prices near $5 a gallon, the Energy Information Administration said. read more

The outlook for demand remains clouded by growing concerns about an economic slowdown in the US and Europe, debt problems in emerging market economies and a strict zero COVID-19 policy in China, the world’s biggest oil importer.

“A break below $90 is now a very real possibility, which is quite remarkable given how tight the market is and how little scope there is to remedy it,” said Craig Erlam, senior market analyst at Oanda in London.

“But the recession talk is getting louder, and should it become reality, it will probably solve some of the imbalance.”

Further pressure followed fears that rising interest rates could slow economic activity and curb demand for fuel. The Bank of England (BoE) raised interest rates on Thursday and warned of recession risks.

An OPEC+ deal on Wednesday to raise its production target by just 100,000 barrels per day (bpd) in September, equivalent to 0.1% of global demand, was seen by some analysts as bearish for the market. read more

OPEC heavyweights Saudi Arabia and the United Arab Emirates are also poised to deliver a “significant increase” in oil output if the world faces a severe supply crunch this winter, sources familiar with the thinking of top Gulf exporters said. read more

Additional reporting by Laura Sanicola and Emily Chow; Editing by Bernadette Baum, Kirsten Donovan

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