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Oil plunges to eight-month low on strong dollar, recession fears

A general view shows the oil refinery of the company Lukoil in Volgograd, Russia April 22, 2022. REUTERS/REUTERS PHOTOGRAPHER

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  • Brent and WTI on track to fall for fourth week in a row
  • Recession fears weigh in as major central banks raise interest rates
  • Nuclear deal with Iran stalled, Ukraine fears cap oil loss

NEW YORK, Sept. 23 (Reuters) – Oil prices fell more than 5% on Friday to an eight-month low as the US dollar hit its highest level in more than two decades amid fears that rising interest rates could push major economies into a will lead to a recession.

Brent futures fell $4.75, or 5.3%, to $85.71 a barrel at 12:06 pm EDT (1606 GMT), down about 6% for the week. US West Texas Intermediate (WTI) crude fell $5.19, or 6.2%, to $78.30, down 8% for the week.

It was the fourth consecutive week of declines for both benchmarks, the first time 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.

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US gasoline and diesel futures also fell more than 5%.

The US Federal Reserve raised interest rates by a hefty 75 basis points on Wednesday. Central banks around the world followed suit with their own raises, increasing the risk of economic slowdowns. read more

“The threat of a global recession continues to weigh on oil prices, with widespread monetary tightening in recent days, fueling fears of a significant growth spurt,” said Craig Erlam, senior market analyst at data and analytics firm OANDA.

The US dollar was on course for its highest closing against a basket of other currencies since May 2002. A strong dollar reduces demand for oil by making fuel more expensive for buyers who use other currencies.

“The crude oil market is under heavy selling pressure as the US dollar maintains a strong upward trajectory as risk appetite continues to decline,” analysts at energy consultancy Ritterbusch and Associates said.

The slowdown in eurozone activity deepened in September, a survey found, suggesting a recession is looming as consumers rein in spending and governments push for energy savings following Russia’s steps to cut off European supplies. read more

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Global equities hit a two-year low on Friday, while the dollar index hit its two-decade high, putting oil prices under pressure. read more

Russia launched referendums aimed at annexing four occupied regions of Ukraine, increasing the stakes of the war in what Kiev called a sham. read more

On the supply side, efforts to revive the 2015 Iran nuclear deal have stalled as Tehran pushes for the UN nuclear watchdog’s investigations to be closed, a senior US State Department official said. , allaying expectations of a resurgence in Iran’s crude oil exports. read more

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Additional reporting by Emily Chow in Singapore and Julia Payne in London; Editing by David Goodman, Louise Heavens, Paul Simao and David Gregorio

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Our Standards: The Thomson Reuters Trust Principles.

Scott Disavino

Thomson Reuters

Covers the North American electricity and natural gas markets.

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