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Oil falls on recession fears and China's Covid-19 worries
It also came under pressure from a strong dollar, which hit multi-year highs amidst interest rate hikes and the escalation of the Russia-Ukraine conflict
- PUBLISHED: Tue 11 Oct 2022, 1:58 PM
Oil slid more than 1 per cent on Tuesday, extending losses of nearly 2 per cent in the previous session, as recession fears and a flare-up in Covid-19 cases in China raised concern over global demand.
On Monday, World Bank President David Malpass and International Monetary Fund (IMF) Managing Director Kristalina Georgieva warned of a growing risk of global recession and said that inflation remains a continuing problem.
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Brent crude fell $1.41, or 1.5 per cent, to $94.78 a barrel by 8.20 GMT. US West Texas Intermediate crude dropped $1.54, or 1.7 per cent, to $89.58.
"There is growing pessimism in the markets now," said Craig Erlam, of brokerage OANDA.
Oil has dropped sharply on economic fears after surging earlier in 2022, when Brent came close to its record high of $147 as the Russia-Ukraine conflict added to supply concerns.
"Warnings after warnings are being issued when it comes to global economic growth," said Avatrade analyst Naeem Aslam.
Those worries aside, fears of a further hit to demand in China also weighed. Authorities have stepped up coronavirus testing in Shanghai and other large cities, as Covid-19 infections rise again.
Oil also came under pressure from a strong dollar, which hit multi-year highs on worries about increases to interest rates and the escalation of the Russia-Ukraine conflict.
A strong dollar makes oil more expensive for buyers with other currencies, thus tending to weigh on risk appetite.
Losses were limited, however, by a tight market, and last week's decision by the Organisation of the Petroleum Exporting Countries (Opec) and allies including Russia (together known as Opec+), to lower their output target by 2 million barrels per day.
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