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oil price: Oil sinks further below $100 as recession risk spooks market

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oil price: Oil sinks further below $100 as recession risk spooks market

Oil prices fell sharply on Tuesday amid a stronger dollar, COVID-19 restrictions in top crude importer China and concerns about a global economic slowdown.

Brent crude futures fell $7.16, or 6.6%, to $99.9 a barrel. U.S. West Texas Intermediate crude fell $6.97, or 6.69%, to $97.19.

The euro fell on Tuesday, in line with the dollar, while stocks fell on the prospect of rising interest rates and worries about the global economy.

A stronger dollar typically weighs on oil because it makes the dollar-denominated commodity more expensive for holders of other currencies.

“In the West, high energy prices and rising interest rates are fueling recession fears, which will have a serious impact on oil demand,” Commerzbank said.

Updated COVID-19 travel restrictions in China also weighed on prices, the bank said.

Several Chinese cities are implementing new COVID-19 containment measures, ranging from business closures to wider lockdowns, in an effort to contain new infections from the highly contagious BA.5.2.1 subvariant of the virus.

White House national security adviser Jack Sullivan said on Monday that U.S. President Joe Biden will demonstrate OPEC’s increased oil production when he meets with Gulf leaders in Saudi Arabia this week.

“There is little hope that Biden visits Saudi Arabia to unleash more production from them or the UAE,” Jeffrey Halley, senior market analyst for Asia Pacific at OANDA, said in a note.

Spare capacity within the Organization of the Petroleum Exporting Countries (OPEC) is dwindling, with most producers operating at maximum capacity.

U.S. Treasury Secretary Janet Yellen is discussing ways to tighten sanctions on Moscow in Asia, including a price cap on Russian oil to limit the country’s profits and help lower energy prices.

Fatih Birol, executive director of the International Energy Agency (IEA), said any price cap on Russian oil should include refined products.

“I hope that this proposal, which is important to minimise the impact on the global economy, will have the support of multiple countries,” Birol told Reuters on the sidelines of the Sydney Energy Forum.

Sanctions imposed by the West on Russia over the war in Ukraine, which Russia calls “special military operations”, have disrupted trade flows of crude oil and fuel.

OPEC forecasts that global oil demand will increase by 2.7 million barrels per day in 2023, slightly less than in 2022, thanks to better containment of the epidemic and still strong global economic growth.

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