NEW YORK: Oil plummeted by about $10 a barrel on Tuesday on concerns of a looming global recession curtailing demand, even with expected supply disruptions as oil and gas workers in Norway began to strike.
Global benchmark Brent crude was down $10.77, or 9.5 percent, at $102.73 a barrel by 11:43 a.m. EDT (1543 GMT). US West Texas Intermediate crude fell $9.30, or 8.6 percent, to $99.13 a barrel from Friday’s close. There was no WTI settlement on Monday because of a US holiday.
“The market is getting tight, but still we're getting creamed and the only way you can explain that away is fear of recession in every risk asset,” said Robert Yawger, director, energy futures at Mizuho, New York. “You’re feeling the pressure.”
Oil futures sank along with equities, which often serve as demand indicator for crude, as investors fretted about the possibility of an economic downturn as central banks across the world take aggressive actions to limit inflation.
Supply concerns still linger, initially lifting WTI and Brent earlier in the session, due to potential output disruption in Norway, where offshore workers began a strike.
The strike is expected to reduce oil and gas output by 89,000 barrels per day, of which gas output makes up 27,500 bpd, Norwegian producer Equinor has said.
Saudi Arabia, the world’s top oil exporter, raised August crude oil prices for Asian buyers to near record levels amid tight supply and robust demand.
Meanwhile, Russia’s former President Dmitry Medvedev said a reported proposal from Japan to cap the price of Russian oil at about half its current level would mean less oil on the market and could push prices above $300-$400 a barrel.
G7 leaders agreed last week to explore the feasibility of introducing temporary import price caps on Russian fossil fuels, including oil, in an attempt to limit resources to finance Moscow’s “special military operation” in Ukraine.