Oil prices fell for a second day on Monday on fears of lower fuel demand from an expected global recession sparked by rising worldwide interest rates and as a surging US dollar limits the ability of non-dollar consumers to purchase crude.
Brent crude futures for November settlement slipped $1.35, or 1.57 per cent, to $84.80 a barrel at 0640 GMT. The contract fell to as low as $84.51, the lowest since Jan 14.
US West Texas Intermediate (WTI) crude futures for November delivery dropped $1.15, or 1.46pc, to $77.59 a barrel. WTI declined to as low as $77.21, the lowest since Jan 6.
Both contracts slumped around 5pc on Friday.
The dollar index that measures the greenback against a basket of major currencies climbed to a 20-year high on Monday.
A stronger greenback tends to curtail demand for dollar-denominated oil since buyers using other currencies must spend more to buy crude.
Central banks in numerous oil-consuming countries, including the United States, the world’s biggest crude user, have raised interest rates to fight surging inflation which has led to concerns the tightening could trigger an economic slowdown.
“A backdrop of global monetary policy tightening by the key central banks to quell elevated inflation, and a splendid run-up in the greenback towards more than two-decade highs has raised concerns about an economic slowdown and is acting as a key headwind for crude prices,” said Sugandha Sachdeva, vice president of commodity research at Religare Broking.
Sachdeva expects WTI prices could find a floor at $75 a barrel, while for Brent $80 will act as a cushion.
The disruptions in the oil market from the Russia-Ukraine war, with European Union sanctions banning Russian crude set to start in December, has lent some support to prices.
The chief executive officer of energy trader Vitol, Russell Hardy, said that fuel shipments are being affected with Russian oil products expected to flow to Asia and the Middle East while supplies from there go to Europe.
Additionally, Hardy told an oil conference in Singapore that more than a million barrels per day (bpd) of US crude is expected to go to Europe to fill the gap in Russian supplies.
The head of Colombian state energy company Ecopetrol said at the same conference that it has been selling more oil to Europe, replacing Russian supplies, while it sees growing competition for market share in Asia.
Attention is turning to what the Organisation of the Petroleum Exporting Countries (Opec) and allies led by Russia, together called Opec+, may do when they meet on Oct 5, after agreeing to cut output modestly at their last meeting.
But, since Opec+ is producing well below its targeted output, any announced cut may not have much impact on supply.
Data last week showed Opec+ missed its target by 3.58 million bpd in August, a bigger shortfall than in July.