On Monday, oil prices fell for a second day due to concerns about a potential global recession brought on by increasing interest rates throughout the world, as well as the fact that non-dollar customers are less able to purchase petroleum due to the strengthening U.S. currency.
At 0640 GMT, the price of Brent oil futures for November settlement dropped $1.35, or 1.57%, to $84.80 a barrel. The contract reached its lowest price since January 14 at $84.51.
West Texas Intermediate (WTI) crude for U.S. markets fell $1.15, or 1.46%, to $77.59 a barrel in November delivery. WTI dropped to its lowest level since January 6 at $77.21.
On Friday, both futures had a 5% decline.
The dollar index, which compares the dollar to a basket of international currencies, reached a 20-year high on Monday.
A higher dollar tends to reduce oil demand priced in dollars since foreign currency purchasers have to pay more for petroleum.
To combat rising inflation, central banks in several oil-consuming nations, notably the United States, the world’s largest consumer of petroleum, have hiked interest rates. This has generated fears that the tightening might cause an economic downturn.
According to Sugandha Sachdeva, vice president of commodity research at Religare Broking, “a backdrop of global monetary policy tightening by the key central banks to quell elevated inflation, and a splendid run-up in the greenback towards more than two-decade highs has raised concerns about an economic slowdown and is acting as a key headwind for crude prices.”
According to Sachdeva, WTI prices may find support near $75 per barrel. Brent’s $80 will act as a cushion.
Prices have received some boost from the interruptions caused by the Russia-Ukraine conflict and the impending European Union sanctions that would prohibit Russian crude beginning in December.
Energy trader Vitol’s CEO, Russell Hardy, claimed that gasoline shipments are being hampered because supplies from Russia are scheduled to move to Europe. At the same time, those from Russia are likely to flow to Asia and the Middle East.
More than a million barrels per day (BPD) of American crude are anticipated to be sent to Europe to make up for the shortfall in Russian supply, according to Hardy, who spoke at an energy conference in Singapore.
At the same conference, the CEO of Colombia’s national energy business Ecopetrol stated that the company had increased its oil exports to Europe to replace the Russian supply. At the same time, it sees growing competition for market share in Asia.
After deciding to reduce output at their previous meeting moderately, the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, known as OPEC+, will meet again on October 5.
However, any declared drop in production may not impact supplies much because OPEC+ is far below its goal output level.
According to data released this week, OPEC+ fell short of its goal by 3.58 million barrels per day in August, compared to July.