Oil prices hit 9-month lows amid fears of recession

A model of barrels of oil in front of the rising stock chart in this illustration, July 24, 2022. REUTERS/Dado Rovich/Illustration

LONDON (Reuters) – Oil prices hit a nine-month low on Monday before regaining some of their gains in volatile trade as markets feared a recession and a strong dollar.

Brent crude futures for November settlement were down 37 cents, or 0.4%, at $85.78 a barrel, after falling as much as $84.51, their lowest since Jan. 14.

US West Texas Intermediate (WTI) crude for November delivery fell $77.21, the lowest since Jan. 6, and last fell 23 cents, or 0.3%, at $78.51.

Both contracts were down about 5% on Friday.

The dollar index, which measures the greenback against a basket of major currencies, rose to a 20-year high on Monday. A strong dollar tends to reduce the demand for dollar-denominated oil.

Refinitiv Eikon data shows that the dollar’s strong impact on oil prices is most evident in over a year.

Meanwhile, interest rate increases imposed by central banks in many oil-consuming countries to combat soaring inflation have raised fears of an economic slowdown and accompanying stagnation in oil demand.

“With more and more central banks forced to take extraordinary action regardless of the cost to the economy, demand will take a hit that could help rebalance the oil market,” said Craig Erlam, chief market analyst at Oanda in London.

Turmoil in the oil market from the Russia-Ukrainian war, with European Union sanctions banning the start of Russian crude in December along with a plan by G7 nations to cap Russian oil prices, has lent some support to prices.

Attention is turning to what the Organization of the Petroleum Exporting Countries (OPEC) and its allies led by Russia, known together as OPEC+, will do when they meet on Oct. 5, having agreed at their previous meeting to modestly cut production.

However, OPEC+ is producing well below its target production, which means the additional cut may not have a significant impact on supply.

Data last week showed that OPEC+ missed its target by 3.58 million barrels per day in August, a larger deficit than in July. Read more

(Reporting by Noah Browning) Additional reporting by Mohi Narayan in New Delhi and Sonali Paul in Melbourne Editing by David Goodman

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