Oil prices fall for a second day on fears of recession

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LONDON – Oil prices fell for a second day on Monday on fears of lower fuel demand due to a possible global recession triggered by rising interest rates, with additional pressure on prices coming from of a rising US dollar.

Brent futures for November settlement fell $1, or 1.2%, to $85.15 a barrel at 0943 GMT. The contract fell to $84.51, the lowest since Jan. 14.

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U.S. West Texas Intermediate (WTI) crude for November delivery fell 87 cents, or 1.1%, to $77.87. WTI fell to $77.21, the lowest since Jan. 6.

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Both contracts fell around 5% on Friday.

The dollar index, which measures the greenback against a basket of major currencies, hit its highest level in 20 years on Monday.

A stronger dollar tends to reduce demand for dollar-denominated oil.

At the same time, interest rate hikes imposed by the central banks of many oil-consuming countries to combat soaring inflation have raised fears of an economic slowdown and a fall in demand for oil.

“A backdrop of global monetary policy tightening by major central banks to stifle high inflation, and a splendid climb of the greenback to more than two-decade highs, have raised concerns of an economic downturn and act as a key headwind for crude prices,” said Religare Broking’s Sugandha Sachdeva.

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Disruptions in the oil market due to the Russian-Ukrainian war, with European Union sanctions banning Russian crude set to begin in December, supported prices.

Attention is turning to what the Organization of the Petroleum Exporting Countries (OPEC) and its Russian-led allies, known as OPEC+, will do when they meet on October 5, after agreeing at their previous meeting to slightly reduce production.

However, OPEC+ is producing well below its production target, meaning further cuts may not have much of an impact on supply.

Last week’s data showed OPEC+ missed its target of 3.58 million barrels per day in August, a bigger shortfall than in July. (Reporting by Noah Browning Additional reporting by Mohi Narayan in New Delhi and Sonali Paul in Melbourne Editing by David Goodman)