Oil drops $6 as recession fears deepen demand fears

A view of Phillips’ 66 Los Angeles Refinery (front), which processes domestic and imported crude oil into gasoline, aviation, and diesel fuels and storage tanks for refined petroleum products at Kinder Morgan Carson Terminal (background), at sunset in Carson, California, United States, 11 March 2022. REUTERS/Beng Guan

LONDON (Reuters) – Oil prices fell $6 on Tuesday as concerns about a possible global recession denting demand outweighed fears of supply disruptions, highlighted by an expected production cut in Norway.

Brent crude fell $6.65, or 5.9 percent, to $106.85 a barrel by 1344 GMT, and US West Texas Intermediate crude fell $5.65, or 5.2 percent, to $102.78 a barrel from Friday’s close. No settlement was reached on WTI on Monday due to a holiday in the United States.

Investors are becoming more concerned as the recent rise in gas and fuel prices is heightening fears about a recession.

“Oil is still struggling to come out of the current recession as the market turns away from inflation to economic desperation,” Stephen Innes of SBI Asset Management wrote.

In the euro zone, data showed that business growth across the bloc slowed further last month, with forward-looking indications that the region could slide lower this quarter as the cost of living crisis keeps consumers wary. Read more

In South Korea, inflation hit a 24-year high in June, adding to concerns about slowing economic growth and oil demand. Read more

Supply concerns remain, as WTI and Brent crude lifted earlier in the session, amid concerns about potential production disruptions in Norway, as workers abroad began a strike. Read more

The strike is expected to cut oil and gas production by 89,000 barrels of oil equivalent per day (boepd), of which gas production is 27,500 barrels per day, according to Norwegian producer Equinor. (EQNR.OL) He said.

Saudi Arabia, the world’s largest oil exporter, raised August crude oil prices for Asian buyers to near record levels amid tight supply and strong demand. Read more

Meanwhile, former Russian President Dmitry Medvedev said on Tuesday that the Japanese proposal to limit the price of Russian oil at about half its current level would mean lower oil in the market and could push prices above $300-$400 a barrel. Read more

G7 leaders agreed last week to explore the feasibility of setting temporary import price limits for Russian fossil fuels, including oil, in an effort to limit resources to fund Moscow’s “special military operation” in Ukraine. Read more

(Reporting by Bozorgmehr Sharafeddin from London, Additional reporting by Florence Tan and Moyo Shaw); Editing by Alexander Smith and Edmund Blair

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