The front-month contract for Brent crude North Sea oil was last seen down USD 0.92 at USD 85.23/bbl, while the WTI equivalent USD 5.35 lower at USD 78.14/bbl – both eight-month lows.
“Crude oil fell sharply… as central banks stepped up efforts to tame inflation at the expense of economic growth,” said Australia’s ANZ in a note, with the likes of the US Federal Reserve and the Bank of England recently raising interest rates.
Oil slid to a multi-month low as “Fed officials signalled they are willing to tolerate a recession as a trade-off for lower inflation”, the bank added.
The US Federal Reserve on Wednesday raised key interest rates in the world’s biggest economy by 75 basis points for the third time in three months, taking them to their highest level in nearly 15 years. The Bank of England on Thursday boosted rates to the highest level for 14 years.
“The [current] selling was magnified by a surge in the USD, making commodities priced in the currency more expensive for investors,” said ANZ.
“At current levels, it appears the market is now pricing in the typical impact of a deep recession.”
The mounting fears of a global recession appeared to offset mounting concerns about the impact of Russia’s rising tensions with the West around an escalation of its war in Ukraine.
Moscow has “warned it will not supply commodities to nations that join any agreement to cap prices for its crude”, said ANZ.
Russian crude and oil products shipments to Europe, the US, Japan and Korea have fallen by around 2m bbl/day since the start of the year, although the country is rerouting flows to India, China and others, according to the International Energy Agency (IEA).
However, the IEA said forthcoming EU bans on Russian crude oil and product imports would see an additional 1m bbl/day of products and 1.4m bbl/day of crude in need of new destinations.