New York — Oil plummeted by about $10 a barrel on Tuesday on concerns of a looming global recession curtailing demand, even with expected supply disruptions as oil and gas workers in Norway began to strike.
Global benchmark Brent crude was down $10.77, or 9.5%, at $102.73 a barrel by 11:43 a.m. EDT (1543 GMT). U.S. West Texas Intermediate (WTI) crude fell $9.30, or 8.6%, to $99.13 a barrel from Friday’s close. There was no WTI settlement on Monday because of a U.S. holiday.
“The market is getting tight, but still we’re getting creamed and the only way you can explain that away is fear of recession in every risk asset,” said Robert Yawger, director, energy futures at Mizuho, New York. “You’re feeling the pressure.”
Oil futures sank along with equities, which often serve as demand indicator for crude, as investors fretted about the possibility of an economic downturn as central banks across the world take aggressive actions to limit inflation.
In the euro zone, data showed business growth across the bloc slowed further last month, with forward-looking indicators suggesting the region could slip into decline this quarter as the cost of living crisis keeps consumers wary.
In South Korea, inflation hit a near 24-year high in June, adding to concerns about slowing economic growth and oil demand.
Supply concerns still linger, initially lifting WTI and Brent earlier in the session, due to potential output disruption in Norway, where offshore workers began a strike.
The strike is expected to reduce oil and gas output by 89,000 barrels of oil equivalent per day (boepd), of which gas output makes up 27,500 boepd, Norwegian producer Equinor (EQNR.OL) has said.
Saudi Arabia, the world’s top oil exporter, raised August crude oil prices for Asian buyers to near record levels amid tight supply and robust demand.
Meanwhile, Russia’s former President Dmitry Medvedev said a reported proposal from Japan to cap the price of Russian oil at about half its current level would mean less oil on the market and could push prices above $300-$400 a barrel.
G7 leaders agreed last week to explore the feasibility of introducing temporary import price caps on Russian fossil fuels, including oil, in an attempt to limit resources to finance Moscow’s “special military operation” in Ukraine.
*Laila Kearney, Bozorgmehr Sharafedin, Florence Tan & Muyu Xu; Editing: Marguerita Choy & Edmund Blair – Reuters
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