Oil prices fall for a second day on fears of an expected recession

The pattern of oil barrels is seen in front of the rising stock market chart in this illustration, July 24, 2022. REUTERS/Dado Ruvic/Illustration

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September 26 (Reuters) – Oil prices fell for the second day on Monday on fears of lower fuel demand due to an expected global recession triggered by rising global interest rates and as the surge in the US dollar limits the ability of non-dollar consumers to buy crude.

Brent futures for November settlement fell $1.35, or 1.57%, to $84.80 a barrel at 0640 GMT. The contract fell as low as $84.51, the lowest since Jan. 14.

U.S. West Texas Intermediate (WTI) crude futures for November delivery fell $1.15, or 1.46%, to $77.59 a barrel. WTI fell to $77.21, the lowest since Jan. 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, hit its highest level in 20 years on Monday.

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

Central banks in many oil-consuming countries, including the United States, the world’s largest user of crude, have raised interest rates to fight soaring inflation, raising fears that the tightening does not trigger an economic downturn.

“A backdrop of global monetary policy tightening by major central banks to stifle high inflation, and a splendid climb of the greenback to more than two-decade highs has raised concerns of an economic downturn and is acting as a key headwind for crude prices,” said Sugandha Sachdeva, vice president of commodity research at Religare Broking.

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

Disruptions in the oil market due to the Russian-Ukrainian war, with European Union sanctions banning Russian crude due to begin in December, supported prices.

Managing director of energy trader Vitol, Russell Hardy, said fuel shipments are being affected by Russian petroleum products which are expected to go to Asia and the Middle East while supplies from them to Europe .

Additionally, Hardy told an oil conference in Singapore that more than one million barrels per day (bpd) of U.S. crude would need to be flown to Europe to fill the Russian supply gap. Read more

The head of Colombian energy company Ecopetrol told the same conference it was selling more oil to Europe, replacing Russian supplies, as it saw growing competition for market share in Asia. Read more

Attention is turning to what the Organization of the Petroleum Exporting Countries (OPEC) and its Russian-led allies, collectively called OPEC+, could do when they meet on October 5, after agreeing to cut production slightly. at their last meeting.

But, as OPEC+ is producing well below its production target, any cuts announced may not have much of an impact on supply.

Last week’s data showed OPEC+ missed its target of 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: The Thomson Reuters Trust Principles.

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