Brent futures slide below $90/bbl as recession fears intensify
Front-month ICE Brent has dropped by $2.05/bbl in the past day, to $88.81/bbl at 09.00 GMT.
PHOTO: Crude prices head for a fourth straight week of losses as recession fears intensify. Getty Images
Upward pressure:
Crude values have been supported by the prospect of a stalled nuclear deal between Iran and the US. The presidents of both countries said chances are slim for an imminent deal when they addressed the United Nations General Assembly this week.
US President Joe Biden said the US would re-enter the agreement if Iran complied with its terms but would not allow Iran to acquire a nuclear weapon. Iranian President Ebrahim Raisi retaliated by asking whether the US "can live up to their commitment this time.”
China's crude demand has rebounded just as refiners prepare to increase output. At least three Chinese state-owned oil refineries and a privately run mega refinery are considering increasing runs by up to 10% in October over September levels, according to Reuters reports.
Downward pressure:
Global recession fears and a strong US dollar continue to weigh on crude prices as central banks hiked interest rates considerably this week. The UK’s Bank of England (BoE) and Switzerland’s central bank also hiked interest rates. They followed on the heels of the US Federal Reserve's big 75-basis-point rate hike for a third time, and raised concerns over a more widespread economic slowdown.
The BoE raised its base rate by 50 basis points on the premise that the UK may already be in a recession. It forecast that GDP would contract by 0.1% in the third quarter. The Swiss National Bank, however, raised its benchmark rate by 75 basis points after inflation in Switzerland soared to the highest level in three decades, at 3.5% last month.
"Supply risks and tight market conditions should give oil some support above the $80 level, but a quicker tumble to a global recession will keep prices heavy,” said OANDA’s Edward Moya in a note.
By Konica Bhatt
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