Oil prices fell for a second day on Monday as fears of lower fuel demand stemming from the anticipated global recession driven by rising interest rates around the world and the rising US dollar limited the ability of non-dollar consumers to purchase crude oil.
Brent crude futures for November delivery fell $1.35, or 1.57%, to $84.80 a barrel at 0640 GMT. Brent fell to $84.51, its lowest level since Jan. 14.
West Texas Intermediate (WTI) crude futures for November delivery fell $1.15, or 1.46%, to $77.59 a barrel. WTI fell to $77.21, its lowest level since Jan.
Both contracts fell around 5% on Friday.
The dollar index, which measures the dollar’s value against a basket of major currencies, climbed to a 20-year high on Monday.
A stronger dollar tends to reduce demand for dollar-denominated oil, as buyers using other currencies have to spend more to purchase crude oil.
Central banks in many oil-consuming countries, including the United States, the world’s largest user of crude, have raised interest rates to combat rising inflation and raised concerns that tightening could trigger an economic slowdown.
A global monetary policy backdrop tightened by key central banks to quell rising inflation and the dollar’s spectacular rise to over two decades’ highs has raised concerns about the economic slowdown and is acting as a key headwind for crude prices.
The disruption in the oil market caused by the Russia-Ukraine war and the European Union sanctions banning Russian crude oil in December provided some support to prices.
Shipments of Russian petroleum products are expected to flow to Asia and the Middle East, and from there to Europe. In addition, more than one million barrels per day (bpd) of US crude is expected to go to Europe to fill the gap in Russian supply.
There is increasing competition for market share in Asia, while perhaps Russia indirectly sells more oil to Europe.
Attention is focused on what the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, may do when they meet on Oct.
However, any announced cuts may not have much of an impact on supply, as OPEC+ is producing well below its targeted output.
Last week’s data showed that OPEC+ missed its target by 3.58 million barrels per day in August, which is a larger deficit than in July.
