The boost to oil prices from OPEC’s small production cut on Monday faded quickly.
Oil prices declined to the lowest in eight months on Wednesday as concerns intensified that a global economic downturn will hurt demand for energy.
West Texas Intermediate
the U.S. benchmark, traded down 1.7% at $85.39 a barrel after earlier slipping as low as $85.08, the lowest since Jan. 26.
the international standard, fell 1.4% to $91.54.
The weakness of oil prices reflects the darkening outlook for global growth as central banks race to raise interest rates and contain the fastest inflation in 40 years. Covid lockdowns in China have crippled expansion in the second-biggest economy, and the strong dollar is making crude more expensive for international buyers.
Prices are now below where they were when Russia invaded Ukraine in February. While that initially sent prices soaring on worries that Russia’s exports would be hurt by sanctions, they have come back down again as that supply still found its way to markets in Asia rather than Europe.
The boost to oil prices seen at the start of the week as the Organization of Petroleum Exporting Countries agreed to a symbolic output cut quickly faded. OPEC said it would cut production by 100,000 barrels a day in October, though it was already struggling pump enough to meet quotas. The cartel has been producing 43.5 million barrels a day for the past two months.
The Federal Reserve has been aggressively raising borrowing costs this year to get inflation under control. It has acted faster than other major central banks, which has lifted the dollar’s value. Dollar appreciation tends to push oil prices down.
Higher interest rates will also lower demand in the economy. Fed Chair Jerome Powell has said that the rate hikes could be painful. The next decision is due Sept. 21.
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