(BFM Bourse) – Black gold prices are penalized by fears of recession and the strength of the greenback.
Crude oil prices slumped on Friday, with New York-listed WTI dipping below $80 a barrel for the first time since January, weighed down by the dollar steamroller and global recession fears.
Around 1:10 p.m. GMT (3:10 p.m. in Paris), the barrel of American West Texas Intermediate (WTI) for delivery in November fell 4.35% to 79.85 dollars.
A barrel of Brent from the North Sea for delivery the same month fell 3.68% to 87.15 dollars.
“The threat of a global recession continues to weigh on oil prices, with widespread monetary tightening over the past two days fueling fears of a hit to growth,” said Craig Erlam, analyst at Oanda.
This is enough to accentuate the downward trend in crude oil by dampening demand.
A dollar at the top
On Wednesday, the US Federal Reserve (Fed) notably tightened the screw by 0.75 percentage points in order to curb inflation.
It thus opened the ball for a week of rate hikes by many central banks around the world, with the exception of Japan and Turkey.
At the same time, the dollar continues to reach new highs against other currencies, benefiting from a US economy that is holding up more than expected and from its status as a safe haven in times of geopolitical tension.
However, sharp rises in the dollar make oil more expensive for buyers who use other currencies, which can weigh on demand.
This is particularly the case with “the Asian energy-importing giants” such as China and India, whose currencies “have been among the worst performers against the dollar”, explains Stephen Brennock, from PVM Energy.
Geopolitical escalation
The strength of the greenback is here to stay, adds the analyst, given the escalation of geopolitical risks regarding Ukraine.
Russian annexation referendums began on Friday in areas of Ukraine wholly or partly controlled by Moscow, marking a new stage in the conflict.
The former Russian president and number two of the country’s Security Council, Dmitry Medvedev, recalled Thursday on Telegram that his country is ready for a nuclear strike.
But analysts point out that the war in Ukraine still threatens the security of energy supplies.
“With an unlikely Iranian nuclear deal, the end of the releases of strategic oil reserves (US, editor’s note) and the imminent reduction of Russian imports by the EU, everything is in place” for a massive supply shock , and therefore a spike in oil prices, concludes Mr. Brennock.
(With AFP)
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