Oil dips below $90 as recession fears mount

An oil pump jack pumps oil into a field near Calgary, Alberta, Canada on July 21, 2014. REUTERS/Todd Korol/File Photo

Sept. 7 (Reuters) – Oil prices sharply lowered on Wednesday, falling below levels seen before the Russian invasion of Ukraine, as dismal Chinese trade data fueled investor concerns about recession risks.

Brent crude futures fell $4.83 to $88 a barrel, falling below $90 a barrel for the first time since Feb. 8. US West Texas Intermediate crude fell $4.94, or 5.7%, to $81.94, its lowest level since January.

“Right now, the market is concerned about what will happen as a result of sharply higher energy prices in Europe, declining demand in Europe and rising interest rates,” said Phil Flynn, an analyst at Price Futures Group.

Several central banks around the world are planning to raise rates to fight inflation, but economists have said the United States appears to be better able to weather the storms. That pushed the dollar to a 24-year high against the yen and a 37-year high against sterling. The stronger dollar is depressing oil prices as most global oil sales are made in dollars.

The European Central Bank is expected to raise interest rates sharply during its meeting on Thursday. A meeting of the US Federal Reserve will follow on September 21. read more

As expected, the Bank of Canada raised interest rates by three-quarters of a percentage point on Wednesday to a 14-year high, and said the key rate should be raised even higher amid raging inflation.

China’s weak economic data and strict zero-COVID policy added to demand concerns. Crude oil imports fell 9.4% in August from a year earlier, customs data shows. read more

Prices received some support from Russian President Vladimir Putin to halt the country’s oil and gas exports if price caps are imposed.

The European Union proposed to cut off Russian gas just hours later, raising the risk of rationing in some of the world’s richest countries this winter. Russia’s Gazprom has halted flows from the Nord Stream 1 pipeline, cutting off a significant percentage of supplies to Europe. read more

Credit rating agency Fitch said on Tuesday that shutting down the Nord Stream 1 pipeline increases the likelihood of a euro-zone recession.

U.S. crude oil inventories are expected to fall for the fourth straight week, dropping an estimated 733,000 barrels in the week to Sept. 2, a preliminary Reuters poll showed. The American Petroleum Institute will release its report on Wednesday, a day later than usual Monday due to a holiday.

Additional reporting by Rowena Edwards Additional reporting by Isabel Kua in Singapore Editing by Jan Harvey, David Goodman and David Gregorio

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