Oil prices plunged over 5% to an eight-month low on Sept. 23 as the U.S. dollar hit its strongest level in more than two decades and on fears rising interest rates will tip major economies into recession.
Brent futures fell $4.75, or 5.3%, to $85.71/bbl by 12:06 p.m. EDT (1606 GMT), down about 6% for the week. WTI crude in the U.S. fell $5.19, or 6.2%, to $78.30, down 8% for the week.
It was the fourth straight week of declines for both benchmarks, the first time this has happened since December. Both were technically oversold, with WTI on track for its lowest settlement since Jan. 5 and Brent for its lowest since Jan. 13.
U.S. gasoline and diesel futures were also down more than 5%.
The U.S. Federal Reserve raised interest rates by a hefty 75 basis points on Sept. 21. Central banks around the world followed suit with their own hikes, raising the risk of economic slowdowns.
“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, a senior market analyst at data and analytics firm OANDA.
The U.S. dollar was on track for its highest close against a basket of other currencies since May 2002. A strong dollar reduces demand for oil by making the fuel more expensive for buyers using other currencies.
“The crude market is under heavy selling pressure as U.S. dollar maintains strong upward trajectory amidst more reduction in risk appetite,” analysts at energy consulting firm Ritterbusch and Associates said.
The eurozone’s downturn in business activity deepened in September, a survey showed, suggesting a recession looms as consumers rein in spending and as governments urge energy conservation following Russia’s moves to cut off European supply.
Global equities hit a two-year low on Sept. 23 while the dollar index reached its highest in two decades, pressuring oil prices.
Russia launched referendums aimed at annexing four occupied regions of Ukraine, raising stakes of the war in what Kyiv called a sham.
On the supply side, efforts to revive the 2015 Iran nuclear deal have stalled as Tehran insists on closure of the U.N. nuclear watchdog’s investigations, a senior U.S. State Department official said, easing expectations of a resurgence of Iranian crude oil exports.
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