Oil prices fall to lowest since before Ukraine invasion as fears of recession weigh

FILE PHOTO – A PetroChina worker inspects a pump cylinder at an oilfield in Tacheng, Xinjiang Uyghur Autonomous Region, China June 27, 2018. REUTERS/Stringer AT

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  • BoE raises rates and warns of recession risks
  • Saudi Arabia and the United Arab Emirates save their oil firepower in the event of a winter supply crisis
  • OPEC+ agrees to raise oil production target by 100,000 bpd
  • Tight global supply offers price support – analysts

LONDON/NEW YORK, Aug 4 (Reuters) – Global oil prices fell on Thursday to their lowest levels since Russia invaded Ukraine in February as traders worried about the possibility of a economic recession later this year that could torpedo energy demand.

Benchmark Brent crude futures fell more than 3% to $93.81 a barrel after hitting a mid-term low of $93.20, the lowest since Feb. 21. 3 at $87.97.

Falling oil prices could provide relief to major consuming countries like the United States and countries in Europe that have urged producers to increase production to offset tight supply and fight runaway inflation.

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Oil had jumped to over $120 a barrel earlier in the year after a sudden rebound in demand from the darkest days of the COVID-19 pandemic combined with supply disruptions resulting from sanctions imposed on the main Russian producer following its invasion of Ukraine.

Thursday’s selloff followed an unexpected increase in U.S. crude oil inventories last week. Gasoline inventories, the proxy for demand, also showed a surprise increase as demand slowed under the weight of gasoline prices near $5 a gallon, the Energy Information Administration said. Read more

The demand outlook remains clouded by growing concerns about an economic collapse in the United States and Europe, over-indebtedness in emerging market economies and a strict zero COVID-19 policy in China, the world’s largest oil importer. world.

“A break below $90 is now a very real possibility, which is quite remarkable given the tightness of the market and the limited scope for relief,” said Craig Erlam, senior market analyst at Oanda. in London.

“But the talk about the recession is getting louder and if it were to come true, that would probably resolve some of the imbalance.”

Other pressures followed fears that rising interest rates could slow economic activity and limit demand for fuel. The Bank of England (BoE) raised rates on Thursday and warned of recession risks.

An OPEC+ deal on Wednesday to raise its production target by just 100,000 barrels per day (bpd) in September, equivalent to 0.1% of global demand, was seen by some analysts as bearish for the market. . Read more

OPEC heavyweights Saudi Arabia and the United Arab Emirates are also ready to provide a “significant increase” in oil production if the world faces a severe supply crisis this winter, it said. said sources close to the thought of the main Gulf exporters. Read more

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Additional reporting by Laura Sanicola and Emily Chow; Editing by Bernadette Baum, Kirsten Donovan

Our standards: The Thomson Reuters Trust Principles.

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