Oil Prices Drop Nearly 2% Fears of Recession Overshadow Supply Concerns

Oil prices fell nearly 2% on Tuesday, after five straight sessions of gains, as concerns about a slowdown in global demand were exacerbated by a stronger U.S. dollar and an outbreak of COVID-19 infections in China.

By 7.31 a.m. Thai time, Brent oil futures had dropped 57 cents, or 0.6%, to $95.62 per barrel, following a loss of $1.73 in the prior session.

US West Texas Intermediate crude was trading at $90.58 per barrel, down 55 cents, or 0.6%, from the previous session’s low of $1.51.

The US dollar gained for the fourth consecutive session on Monday, as investors braced for high inflation data this week, which could lead to the Federal Reserve maintaining its aggressive monetary policy.

Since oil is priced in dollars, a stronger dollar reduces demand from consumers using other currencies, according to Reuters.

Meanwhile, COVID-19 cases in China, the world’s second-largest oil consumer, have reached their highest level since August. According to figures released on Saturday, the country’s service sector shrank in September for the first time in four months as COVID-19 restrictions dampened demand and eroded company confidence.