Crude oil prices fell yesterday to their lowest since before Russia invaded Ukraine as COVID-19 curbs in top crude importer China and expectations of more interest rate hikes spurred worries of a global economic recession and lower fuel demand.
Brent crude futures fell $1.35, or 1.5 per cent, to $91.48 a barrel earlier , after slipping 3 per cent in the previous session. The contract hit a session low of $91.35, the lowest since February 18, this year.
Also, the United States West Texas Intermediate crude futures shed $1.55, or 1.8 per cent, to $85.33. The benchmark fell to a session low of $85.17, the lowest since Jan. 26.
It came 48 hours after the Organisation of Petroleum Exporting Countries (OPEC) and its allies cut their October supplies to the global economy by 100,000 barrels per day, underlining concerns over crude prices that are declining amid recession fears.
The international oil cartel also slashed Nigeria’s production for the month by 4,000 barrels per day, to 1.826 million bpd as against the 1.830 million bpd allocated in September.
OPEC’s decision also wiped off the small increase in oil production agreed upon in September following calls by the United States and other major consumers for more supply.
But Nigeria has even before now been unable to produce all its production allocation, hitting just 1.083 million bpd in the July assessment after it fell to a record low of 1.024 million bpd the previous month.
China’s stringent zero-COVID policy has kept cities such as Chengdu, with 21.2 million people, under lockdown, curbing people movement and oil demand at the world’s second-largest consumer, Reuters reported.
The country’s exports and imports lost momentum in August with growth significantly missing forecasts. Crude oil imports fell 9.4 per cent in August from a year earlier, customs data showed on Wednesday, as outages at state-run refineries and lower operations at independent plants amid weak margins capped buying.
United States crude stockpiles are expected to have fallen for a fourth consecutive week, declining by an estimated 733,000 barrels in the week to September 2.
Crude inventories in the United States Strategic Petroleum Reserve (SPR) fell 7.5 million barrels in the week to September 2 to 442.5 million barrels, their lowest since November 1984, according to data from the Department of Energy.
However, oil prices later fluctuated wildly Wednesday as the market balanced demand worries related to looming recession risks with fears that Russia will halt all oil and gas supplies.
After session lows not seen since before Russia’s invasion of Ukraine, Brent crude futures were later up 2 cents, or 0.02 per cent, at $92.85 a barrel while US West Texas Intermediate crude gained 9 cents, or 0.1 per cent, to $86.97.
Oil pared losses after Russian President Vladimir Putin threatened to halt all oil and gas supplies if price caps are imposed on Russia’s energy resources. The market is also juggling bearish sentiment from the prospect of a global economic recession.
Credit rating agency Fitch on Tuesday said that the halting of the Nord Stream 1 pipeline had increased the likelihood of a recession in the euro zone.