An aerial view of the Phillips 66 Oil Refinery is seen in Linden, New Jersey, USA.
Tayfun Cosku | Anadolu Agency | Getty Images
Brent crude fell below $85 a barrel on Monday as recession fears weighed and the American dollars leaps.
Brent futures for November settlement fell to around $84.53 early in the day, before recovering to trade around $87 at 11 a.m. on Wall Street for a 1% gain. West Texas Intermediate Futures rose 1.2% to trade at $79.62 a barrel. Earlier in the session, the contract hit a session low of $77.21, a price last seen on Jan. 6.
The American dollars hit a high not seen since Monday 2002, while the pound sterling dropped to an all time high against the currency.
On Friday, Brent and WTI futures fell around 5%.
Lower oil prices are a “macro move led by a stronger dollar,” raising fears of a recession, according to Amrita Sen, co-founder and research director at Energy Aspects.
The surge against other currencies means that dollar-denominated assets such as oil have become more expensive for investors holding foreign currencies and “have weighed on futures prices”, according to John Morley, associate editorial director for crude. and fuel oil EMEA at S&P Global.
This comes as central banks around the world — including the United States and Great Britain. — continue to raise interest rates to fight inflation.
Investment bank Saxo’s strategy team said market sentiment continued to deteriorate.
“The relentless pressure on commodities, including crude oil, continues after Friday’s dismal session which saw accelerating dollar strength and growth pessimism send ripples through markets,” said Ole Hansen, Head of Commodity Strategy at Saxo.
“WTI is trading below $80 a barrel while a comeback to the mid-80s in Brent could soon see OPEC+ action to support prices,” he said.
As Russia has warned, it will not supply products to nations agreeing to cap the prices of its crude and markets price in a recession, “the energy sector could be the first to find support once the dollar stabilizes,” Hansen said.
Fears around an economic slowdown continue to mount, with Steve Hanke, professor of applied economics at Johns Hopkins University, putting the odds of the US falling into recession at 80%.
“Whether [the Fed] Continue[s] quantitative tightening and move that growth rate and M2 (money supply) into negative territory, that will be serious,” Hanke told CNBC’s “Street Signs Asia” on Friday.