Oil prices?dropped nearly 2% this week, extending the last sessions almost 2% decline, as recession fears and a flare-up in COVID-19 cases in China increased concerns over global demand. World Bank President David Malpass and International Monetary Fund Managing Director Kristalina Georgieva warned of an increased risk of global recession and stated inflation remained a continuing problem.
Brent crude decreased $1.62, or 1.7%, to $94.57 a barrel by 12:14 p.m. EDT (1614 GMT). US West Texas Intermediate crude dropped $1.72, or 1.9%, to $89.41.
There is growing pessimism in the markets now, according to Craig Erlam of brokerage OANDA. Oil?has decreased abruptly on economic fears after increasing recently in 2022 when Brent came close to its record high of $147 as Russias invasion of Ukraine added to supply concerns.
Moreover, fears of a further hit to demand in China were also weighed. Authorities have increased coronavirus testing in Shanghai and other large cities as COVID-19 infections surge again.
From an economic perspective, it seems like Chinas throwing the baby out with the bathwater by continuing to lock down its population to lower cases, as stated John Kilduff, partner at Again Capital LLC in New York.
Sources reported that oil was also affected due to a strong dollar, which hit multi-year highs on worries about interest rate rises and escalation of the Ukraine war. However, losses were limited due to a tight market and last weeks decision by the Organization of the Petroleum Exporting Countries (OPEC) and partners including Russia, combine called OPEC+, to decrease their output target by two million barrels per day.
Meanwhile, President Joe Biden is busy re-evaluating the US relationship with Saudi Arabia after OPEC+ announced it would decrease oil production last week, as stated by White House national security spokesman John Kirby. An undersupply is even looming next year because the production cut is supposed to apply until the end of 2023, according to the OPEC+ decision.