Oil prices drop to 12-week low on recession fears
On Wednesday, oil prices dropped to a 12 week low in volatile trade, extending Tuesday's losses due to growing fears of demand destruction from a global recession.
Brent LCOc 1 futures fell by $2.99, or 2.9%, to $99.78 a barrel by 10: 57 a.m. EDT 1457 GMT, while U.S. West Texas Intermediate WTI crude CLc 1 fell $3.19, or 3.2%, to $96.31.
That puts WTI and Brent on track for their lowest closes since April 11, after Brent fell 9% and WTI fell 8% on Tuesday.
Both benchmarks were in technically oversold territory with a relative strength index RSI below 30 for the second day in a row. If Brent closes at that level, it would be the first time since December 2021 that it remains in oversold territory.
The oil sell off was driven by growing recession fears, according to investment bank Goldman Sachs.
As investors started to buy safe-haven debt, Germany's government borrowing costs fell to a five-week low.
The U.S stock indexes fell on Wednesday as investors waited minutes from the Federal Reserve meeting to gauge the health of the economy and the pace of interest rate hikes in order to beat inflation.
Oil prices were also knocked down by a soaring U.S. dollar, which rose to a near 20 year high against a basket of other currencies.
A stronger U.S. dollar makes oil more expensive for holders of other currencies, which can curb demand.
The market worried that new COVID 19 lockdowns could cut demand in China, the world's biggest oil importer.
China's crude oil imports from Russia increased by 55% from a year ago to a record level in May. Russia displaced Saudi Arabia as the top supplier as refiners cashed in on discounted supplies amid sanctions on Moscow over its invasion of Ukraine.
Equinor ASA said all oil and gas fields affected by a strike in Norway's petroleum sector are expected to be back in full operation within a couple of days, adding to downward pressure on oil prices.
Iran wants to reach a strong and lasting nuclear agreement with world powers after talks with U.S. ally Qatar on easing stalled efforts to revive a 2015 nuclear pact.
The deal with Iran could add 1 million barrels per day of crude to world supply, according to analysts.
Trade was volatile on Wednesday. Both benchmarks went up over $2 a barrel earlier in the day on supply concerns.
A Russian court told the Caspian Pipeline Consortium, CPC, which takes oil from Kazakhstan to the Black Sea, to suspend activity for 30 days. Sources said exports were still flowing.
In Kazakhstan, an explosion at the giant Tengiz oilfield killed two workers and injured three.
Mohammad Barkindo, the outgoing secretary general of the Organization of the Petroleum Exporting Countries OPEC, died at 63.