Oil dropped by over 2% on October 11, extending losses of almost 2% in the previous session, as recession fears and a flare-up in COVID-19 cases in China raised worries over global demand.
International Monetary Fund (IMF) Managing Director Kristalina Georgieva and World Bank President David Malpass warned on October 10 about a growing risk of global recession and stated that inflation remains a continuing challenge.
Brent crude dropped $2.30 (2.4%) to trade at $93.89 a barrel by 1006 GMT. U.S. West Texas Intermediate (WTI) crude lost $2.12 (2.3%) to trade at $89.01. Craig Erlam of brokerage OANDA said:
“There is growing pessimism in the markets now.”
Oil has dropped steeply on economic fears after it surged earlier in 2022 when Brent came close to reaching its record high of $147 as Russia’s invasion of Ukraine added to supply worries. Avatrade analyst Naeem Aslam commented:
“Warnings after warnings are being issued when it comes to global economic growth.”
Those fears aside, worries of an additional hit to demand in China also weighed in. Authorities and regulators have stepped up COVID-19 testing in Shanghai and other major cities as coronavirus infections seem to rise once more.
Oil also came under lots of pressure from a strong dollar that reached multi-year highs on worries about hikes to interest rates and escalation of the Ukraine war. A strong dollar makes oil increasingly expensive for buyers who have other currencies and seems to weigh heavily on risk appetite.
Buy Bitcoin NowNonetheless, losses were limited by a tight market and the past week’s decision by the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia (OPEC+) to lower their output target by 2 million barrels per day.
A Commerzbank report said:
“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.”
