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oil prices: Oil plummets below $100 as recession risks come to forefront

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oil prices: Oil plummets below $100 as recession risks come to forefront

Oil prices tumbled on Tuesday, with the U.S. benchmark falling below $100 as fears of a recession intensified, stoking fears that a slowing economy will cut demand for oil products.

U.S. oil benchmark West Texas Intermediate fell 8.4 percent, or $9.14, to settle at $99.29 a barrel. The contract was last traded below $100 on May 11. International benchmark Brent crude fell 9.1 percent, or $10.34, to $103.16 a barrel on Tuesday.

Oil prices were under pressure during a low-liquidity session on Tuesday, as falling equities and a surging dollar made dollar-denominated commodities less attractive. In the event of a recession, crude oil prices could fall to $65 this year, Citigroup said, in stark contrast to JPMorgan’s most bullish $380-a-barrel scenario.

“The market is getting nervous, but we’re still nervous, and the only way you can explain that is the fear of a recession in every risky asset,” said Robert Yawger, director of energy futures at Mizuho in New York. “You feel the pressure.”

In the euro zone, data showed business growth slowed further across the group last month, with forward-looking indicators suggesting the region could slip into recession this quarter as the cost of living crisis keeps consumers on their toes.

In South Korea, inflation hit a near 24-year high in June, adding to concerns about slowing economic growth and slowing oil demand.

Supply concerns remained lingering, initially boosting WTI and Brent crude after potential output disruptions in Norway and a strike by offshore workers.

Norwegian producer Equinor said the strike is expected to reduce oil and gas production by 89,000 barrels of oil equivalent (boepd), including 27,500 boepd of gas.

Saudi Arabia, the world’s top oil exporter, raised crude prices to near-record levels for Asian buyers in August amid tight supplies and strong demand.

Meanwhile, former Russian President Dmitry Medvedev said Japan’s reported proposal to cap Russian oil prices at around half current levels would mean less oil on the market and could push prices to as high as 300 to 300 per barrel. $400+.

G7 leaders agreed last week to explore the feasibility of imposing temporary import price caps on Russian fossil fuels, including oil, to limit resources to fund Moscow’s “special military operation” in Ukraine.

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