Oil prices fell Friday to near their lowest levels since February as concerns about a possible recession and a decline in fuel demand continued to rattle markets.
Brent oil fell 50 cents or 0.5 percent to $93.62 a barrel. US West Texas Intermediate crude fell 66 cents, or 0.8 percent, to $87.88.
Prices have come under pressure this week as the market worried about the impact of inflation on economic growth and demand, but signs of tight supply kept prices underground.
Concerns about the recession have heightened since the Bank of England warned on Thursday of a prolonged downturn after raising interest rates by the most since 1995.
“If commodities don’t price in an impending economic recession, they may be preparing for an era of ‘stagflation’ when unemployment starts to rise and inflation remains high,” said CMC Markets analyst Tina Teng.
The price drop comes despite relatively tight inventories, as evidenced by continued backwardation, a market structure where prompt prices are higher than those seen in the coming months.
“It’s clear that everyone is taking the threat of a recession much more seriously as we are still seeing a very tight market and producers who are unable to change that,” said Craig Erlam, senior market analyst at Oanda in London.
The OPEC+ producer group this week agreed to increase its oil production target by 100,000 barrels per day (bpd) in September, but this was one of the smallest increases since such quotas were introduced in 1982, OPEC data shows.
Supply concerns are expected to intensify closer to winter, with European Union sanctions banning overseas imports of Russian crude and oil products coming into effect on December 5.
“With the EU phasing out Russian seaborne imports, there is a key question as to whether Middle Eastern producers will divert their barrels to Europe to fill the void,” said RBC analyst Michael Tran.
“How this Russian oil sanctions policy spirals out of control will be one of the most sweeping things to watch for the rest of the year.”