(LONDON) Oil prices lost ground on Friday after a flurry of rate hikes from several central banks around the world, bolstered fears of a global recession.
Posted at 8:12
Around 9:30 a.m. GMT (11:30 a.m. in Paris), a barrel of Brent from the North Sea for delivery in November fell by 1.56%, to 89.05 dollars.
The barrel of American West Texas Intermediate (WTI) for delivery the same month, lost 1.81% to 81.98 dollars.
On Wednesday, the US Federal Reserve (Fed) in particular proceeded to a strong turn of the screw of 0.75 percentage point, the third rate hike of this magnitude in a row, in order to curb inflation.
It thus opened the ball for a week of rate hikes by many central banks around the world, with the exception of Japan and Turkey.
For Han Tan, an analyst at Exinity, this salvo of increases is above all a sign that “the risks of a global recession could well intensify”, accentuating the downward trend in crude oil by dampening demand.
If these fears grow, “Brent could return to the area (of) 80 dollars a barrel in the short term,” said the analyst.
At the same time, the dollar continues to reach new highs against other currencies, benefiting from a US economy that is holding up more than expected and from its status as a safe haven in times of geopolitical tension.
However, sharp rises in the dollar make oil more expensive for buyers who use other currencies, which can weigh on demand.
This is particularly the case “of Asian energy-importing giants” such as China and India, whose currencies “have been among the worst performers against the dollar”, explains Stephen Brennock, from PVM Energy.
The strength of the greenback is here to stay, adds the analyst, given the escalation of geopolitical risks regarding Ukraine.
Russian annexation referendums began on Friday in areas of Ukraine wholly or partly controlled by Moscow, marking a new stage in the conflict.
The former Russian president and number two of the country’s Security Council, Dmitry Medvedev, recalled Thursday on Telegram that his country is ready for a nuclear strike.
But analysts point out that the war in Ukraine still threatens the security of energy supplies.
“With an Iranian nuclear deal that seems unlikely, the end of the release of strategic oil reserves (American, editor’s note)” and the imminent reduction of Russian imports by the European Union, everything is in place “for a shock of massive supply, and therefore a spike in oil prices,” concludes Mr. Brennock.