Oil prices set to end week at pre-Ukraine crisis level on fears of recession

Oil prices set to end week at pre-Ukraine crisis level on fears of recession

Oil prices set to end week at multi-month lows on recession fears

Oil prices fell on Friday and were near their lowest levels since February as worries about a possible recession and lower demand for fuel continued to rattle markets.

Brent crude fell 50 cents, or 0.5%, to $93.62 a barrel. U.S. West Texas Intermediate crude fell 66 cents, or 0.8%, to $87.88.

Prices came under pressure this week as the market worried about the impact of inflation on economic growth and demand, but signs of tighter supply kept prices bottoming.

Recession concerns have intensified since the Bank of England warned Thursday of a prolonged slowdown after raising interest rates to the highest since 1995.

“If commodities aren’t priced in a looming economic downturn, they could be bracing for an era of ‘stagflation’ when the unemployment rate starts to rise and inflation stays elevated,” said Tina Teng, an analyst at CMC Markets.

The fall in prices comes despite relatively tight supplies, as indicated by persistent backwardation, a market structure whereby rapid prices are higher than those in the months ahead.

“Obviously everyone is taking the threat of recession much more seriously as we still see a very tight market and producers unable to change that,” said Craig Erlam, senior market analyst at Oanda in London.

The OPEC+ producer group agreed this week to raise its oil production target by 100,000 barrels per day (bpd) in September, but it is one of the smallest increases since those quotas were introduced. in 1982, according to OPEC data.

Supply problems are expected to increase as winter approaches, with European Union sanctions banning maritime imports of Russian crude and petroleum products due to come into effect on December 5.

“With the EU halting Russian imports by sea, the key question is whether Middle Eastern producers will re-route their barrels to Europe to fill the void,” RBC analyst Michael Tran said. .

“How this Russian policy of oil sanctions plays out will be one of the most important issues to watch for the rest of the year.”

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