- Oil prices fell on Friday and were on track to lose ground for the week.
- WTI crude oil fell to a nine-month low and traded just above $80 a barrel.
- Fears about a global recession rose after this week’s round of rate hikes by central banks.
Oil prices fell to a nine-month low on Friday as recession fears spread across global risk assets and the US dollar continued to rise this year to hit a new two-decade high against major currencies.
West Texas Intermediate crude fell as much as 3.8% to $80.35 a barrel, the lowest price since January. Subsequently, the decrease was reduced to 3.4%. Brent crude, the international benchmark, fell 3.2% to $87.41, its lowest price since January.
WTI was headed for a weekly loss of more than 5% and Brent was headed for a drop of more than 4% on the week.
“The threat of a global recession continues to weigh on oil prices, with widespread monetary tightening in recent days fueling fears of a significant hit to growth,” Craig Erlam, senior market analyst at Oanda, said in a statement. note. “Central banks now seem to accept that a recession is the price to pay for reining in inflation, which could weigh on demand next year.”
The Federal Reserve on Wednesday and the Bank of England and the central banks of Norway and Switzerland on Thursday raised interest rates to tackle elevated inflation as energy and food prices rose this year. The Federal Open Market Committee, aiming to slow activity in the world’s largest economy, is expected to lengthen its rate hike cycle until 2023 and expects to hit a maximum interest rate of 4.6%.
Recession concerns also hit European and Asian stock markets on Friday and US stock futures were in the red.
Oil prices were also lower than the US dollar and continued to rise. The US dollar index rose 0.8% on Friday, topping 112 to hit a new 20-year high. Dollar-denominated oil prices may be affected by gains in the value of the dollar, as it makes buying the commodity more expensive for foreign currency holders.
The index, which tracks the performance of the dollar against the euro, Japanese yen, sterling, Canadian dollar, Swedish krona and Swiss franc, was on track to rise more than 2% this week. The gains were buoyed by this week’s Fed rate hike of 75 basis points, the third meeting in a row to mark a huge increase in the fed funds rate. The rise in Treasury yields after the latest Fed rate hike has boosted demand for dollars.
Meanwhile, European Union officials are rushing to reach a deal to cap Russian oil prices after President Vladimir Putin stepped up Moscow’s aggression against Ukraine, according to a report. Bloomberg report Friday. The EU embargo on Russian crude transported by sea will start on December 5.