Oil futures dropped sharply Friday morning as recession fears gripped financial markets, sinking equities and government bonds, while contributing to a further rise by the U.S. dollar.
West Texas Intermediate crude for November delivery
fell $2.76, or 3.3%, to $80.71 a barrel on the New York Mercantile Exchange.
November Brent crude
the global benchmark, dropped $2.66, or 2.9%, at $87.80 a barrel on ICE Futures Europe. The most actively traded December contract
declined $2.76, or 3.1%, to $87.70 a barrel.
Back on Nymex, October gasoline
fell 3.8% to $2.419 a gallon, while October heating oil
shed 3.3% to $3.297 a gallon.
October natural gas
rose 0.8% to $.7.146 per million British thermal units.
Global equities fell sharply Friday, with U.S. stock futures pointing to steep losses on Wall Street. The Federal Reserve earlier this week delivered another outsize interest rate hike and signaled it would drive rates higher than market participants had previously anticipated. A number of other global central banks also delivered rate increases this week, underlining investor worries about the economic outlook.
“The threat of a global recession continues to weigh on oil prices, with widespread monetary tightening over the last couple of days fueling fears of a significant hit to growth,” said Craig Erlam, senior market analyst at Oanda, in a note.
“Central banks now appear to accept that a recession is the price to pay for getting a grip on inflation, which could weigh on demand next year,” he said.
The market, however, remains tight, Erlam said, and the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, have signaled they’re willing to restrict supply further even as they fail to deliver on current production quotas. Progress toward a restored nuclear deal for Iran, which would allow it to resume exports, also appears to have stalled, he noted, while worries remain over Russia’s escalation of the war in Ukraine.