Oil Prices drop by 3% on fears of a recession.

On fears of a recession, oil prices drop by 3%.

On Wednesday, oil prices fell further as a result of investor concerns over the weakening status of the global economy, the potential for central bank interest rate increases, and tighter regulations in China to combat COVID-19.

Following a loss of $5.78 on Tuesday, October Brent crude futures, which expire on Wednesday, were down $3.56 at $95.75 per barrel.

At $95.14 per barrel, the more active November contract was down $2.70, or 2.76%.

After falling $5.37 the previous session due to recession fears, U.S. West Texas Intermediate (WTI) oil futures were down $2.58, or 2.82%, at $89.06 per barrel by 0939 GMT.

Price fluctuations since the start of the Ukraine crisis six months ago have alarmed hedge funds and speculators and reduced trading, which has further exacerbated the market’s whipsaw, as was seen on Tuesday.

According to Tamas Varga, an analyst at PVM Oil Associates, “the newest signals of stalling growth are decreasing Chinese industrial activity in August and the slower-than-expected expansion of the country’s service sector.”

Additionally, it is anticipated that both the Fed and the ECB will raise interest rates sharply next month, most likely by as much as 0.75%.

All of these factors cause stock investors to flee the market. Oil follows suit, at least temporarily.

The worst heatwaves in decades, new COVID infections, and a troubled real estate market all impacted production in China’s factories in August, continuing reductions that indicate the economy may find it difficult to maintain momentum.

At a time when the second-largest economy in the world is already experiencing sluggish growth, some of China’s largest cities, including Shenzhen and Dalian, are implementing lockdowns and commercial closures to stop COVID-19 breakouts.

Some bullish elements gave prices a base.

For the week ending August 26, according to data from the American Petroleum Institute (API), gasoline inventories decreased by roughly 3.4 million barrels, while distillate stocks—which include diesel and jet fuel—decreased by around 1.7 million barrels.

The decrease in gasoline stockpiles was almost three times greater than the 1.2 million barrel decline that eight analysts surveyed by Reuters on average had predicted.

They had anticipated a decrease of around 1 million barrels in distillate inventory.

In contrast to analysts’ predictions of a reduction of roughly 1.5 million barrels, API data revealed a rise in crude stockpiles of nearly 593,000 barrels.

Talk of supply cuts by the Organization of the Petroleum Exporting Countries (OPEC) and its partners, collectively known as OPEC+, is another factor supporting prices. On Sept. 5, OPEC+ is scheduled to meet again.

Russian gas policy provided additional support.

On Wednesday, Gazprom cut off natural gas supplies through Europe’s main supply route as the economic conflict between Moscow and Brussels grew more heated.

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