Oil prices fell 5% early Friday, with the US benchmark plunging to its lowest level since January, amid heightened concerns about slowing economic growth and looming recessions.
At 10:06 a.m. ET on Friday, WTI Crude had dipped below $80 a barrel and was trading 5.58% to $78.83 a barrel. Brent Crude, the international benchmark, stood at $86.11, down 4.81% on the day.
The first-month WTI contract went down more than 5% this week, with fears of dwindling oil demand amid potential recessions outpacing the escalation of Russia’s war in Ukraine.
Oil prices skyrocketed earlier this week when Vladimir Putin ordered a “partial mobilization” of 300,000 men to fight in Ukraine in Russia’s first mass trek since World War II. Putin also hinted at the possibility of using “all means” to defend Russia, which analysts interpreted as a threat that he could use nuclear weapons.
Still, oil prices fell later in the week on the strength of the dollar and fears of a recession mounted, with major central banks raising interest rates again to fight inflation. This week, the Fed raised its key rate by an additional 75 basis points for the third time in a row. The following day, the Bank of England raised interest rates by 50 basis points to 2.25%, the highest rate since the start of the 2008 financial crisis.
Crude oil, meanwhile, fell after being confined to a relatively narrow range for most of the week, with the Powell-Putin battle (demand vs. supply) not having a clear winner until Friday, when both Brent and WTI fell as the FOMC indicated the risk appetite. and fears of growth were kicked up a gear as the dollar and yields continued to rise,” said Ole Hansen, head of commodity strategy at Saxo Bank in a weekly commodities note on Friday.
“A difficult and potentially volatile quarter awaits with multiple and conflicting uncertainties moving in its direction. While the risk to growth is being priced in, the market has left it to another day to worry about the supply-cutting impact of an EU embargo on Russian oil and fuel, as well as a partial reversal in US sales of 180 million barrels from its Strategic Reserves,” added Hansen.
By Charles Kennedy for Oilprice.com
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