Oil settles below $90 as recession fears mount

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

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Sept 7 (Reuters) – Oil prices fell sharply on Wednesday, falling from levels seen before Russia’s invasion of Ukraine, as Chinese trade data worried investors about recession risks.

Brent crude fell $4.83 to $88 a barrel, having fallen below $90 a barrel since February 8. US West Texas Intermediate crude fell $4.94, or 5.7%, to $81.94, its lowest since January.

“Right now the market is based on concerns about what will happen with higher energy prices in Europe, lower demand in Europe and rising interest rates,” said Bill Flynn, analyst at Price Futures Group.

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Several global central banks are slated to raise rates to fight inflation, but economists say the U.S. is better placed to weather the storms. It lifted the dollar to a 24-year high against the yen and a 37-year high against sterling. As global oil sales are transacted in dollars, a strong greenback is pressuring oil prices.

The European Central Bank is expected to raise interest rates sharply when it meets on Thursday. The US Federal Reserve meeting on Sept. It continues on the 21st. read more

The Bank of Canada raised interest rates by three-quarters of a percentage point to a 14-year high on Wednesday, and said the policy rate should stay higher as it battles inflation.

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

The prices have received some support from Russian President Vladimir Putin, who plans to freeze the country’s oil and gas exports if price caps are imposed.

The European Union proposed curbs on Russian gas 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 the shutdown of the Nord Stream 1 pipeline has raised the possibility of a recession in the euro zone.

U.S. crude stockpiles fell for a fourth straight week and were expected to fall by 733,000 barrels in the week to September 2, according to a preliminary Reuters poll. The American Petroleum Institute is releasing its report on Wednesday, a day later than usual, as Monday is a public holiday.

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

Our Standards: Thomson Reuters Trust Principles.

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