Brent crude hit its lowest level before the Ukrainian invasion, amid fears of recession

FILE PHOTO – A PetroChina worker inspects a crane at an oil field in Tacheng, Xinjiang Uyghur Autonomous Region, China, June 27, 2018. REUTERS/Stringer At

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  • Bank of England raises interest rates, warns of recession risks
  • Saudi Arabia and UAE maintain oil firepower in case of winter supply crunch
  • OPEC + agrees to increase oil production target by 100,000 barrels per day
  • Tight global supply provides price support – Analysts

LONDON (Reuters) – Oil prices fell on Thursday, with Brent touching $93.50 a barrel – the lowest level since February 21 before Russia’s invasion of Ukraine – sending prices higher – as fears mounted of an economic recession that could dampen demand for fuel.

Brent crude futures fell $2.88, or 3%, at $93.90 a barrel by 1543 GMT, while West Texas Intermediate crude futures fell $2.37, down 2.6 percent, to $88.29.

Brent crude hit its lowest level since February 21, at $93.50, while US crude touched its lowest level since February 3 at $87.97.

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The sale came after an unexpected rise in US crude stocks last week. The Energy Information Administration said gasoline stocks, a proxy for demand, also showed a sudden increase as demand slowed. Read more

Demand outlook remained clouded by mounting concerns about economic stagnation in the United States and Europe, debt distress in emerging market economies, and the stringent zero-policy of COVID-19 in China, the world’s largest oil importer.

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“A breakout below $90 is now a very real possibility which is very impressive given how tight the market is and how little room there is to mitigate that,” said Craig Erlam, chief market analyst at Oanda in London.

“But talk of recession is getting louder, and if it becomes a reality, it will likely address some of the imbalance.”

Further pressure came on the heels of concerns that higher interest rates could slow economic activity and curb demand for fuel. The Bank of England raised interest rates on Thursday and warned of the risks of a recession.

And some analysts considered the OPEC + agreement on Wednesday to increase the production target by only 100,000 barrels per day in September, equivalent to 0.1 percent of global demand, as bearish for the market. Read more

Sources familiar with the thinking of major Gulf exporters said that the two heavyweights in OPEC, Saudi Arabia and the UAE, are ready to achieve a “significant increase” in oil production if the world faces a severe supply crisis this winter. Read more

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Additional reporting by Laura Sanicola and Emily Chow. Editing by Bernadette Bohm

Our criteria: Thomson Reuters Trust Principles.

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