© Reuters.FILE PHOTO: A view of Phillips 66’s Los Angeles refinery (foreground), which processes domestic and imported crude oil into gasoline, aviation and diesel fuel, and storage tanks for refined petroleum products at Kinder Morgan’s Carson Terminal
NEW YORK (Reuters) – Oil prices slumped by around $10 a barrel on Tuesday, as fears of a global recession dampening demand overshadowed a strike by oil and gas workers in Norway that could cut exports and exacerbate supply shortages.
The global benchmark was down $10.65, or 9.4%, at $102.85 a barrel by 12:46 p.m. ET (1645 GMT). U.S. West Texas Intermediate (WTI) crude fell $9.36, or 8.6%, to $99.07 a barrel from Friday’s close. There is no WTI settlement on Monday due to a US holiday.
“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, head of energy futures at Mizuho. You feel the pressure.”
Oil futures fell along with stocks, which are often indicators of crude demand, as investors fretted about the possibility of an economic downturn as central banks around the world moved aggressively to limit inflation.
Andy Lipow, president of Houston-based Lipow Oil Associates, said that if a recession does hit and severely dents energy demand, a sharper downward trend is likely.
“When you’re in a recession and supply exceeds demand, commodity markets can be very relentless,” Lipow said.
Meanwhile, safe-haven demand for U.S. Treasuries pushed the dollar up about 1.5 percent, which in turn weighed on dollar-denominated oil as it became more expensive for buyers holding other currencies. [USD/]
The euro fell to a two-year low last month after data showed business growth across the bloc slowed further 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 as workers at sea began to strike amid an expected output disruption in Norway.
A strike in Europe’s second-biggest energy supplier after Russia will cut gas exports by 1,117,000 barrels of oil equivalent (boe) per day, or 56% of daily gas exports, by Saturday, and by 341,000 barrels per day, Norway Oil and Gas (NOG) Employers’ Hall said.
Saudi Arabia, the world’s top oil exporter, raised prices for Asian buyers to near-record levels 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.