Oil prices regained losses from their lowest level in 9 months

A model of barrels of oil in front of the rising stock chart in this illustration, July 24, 2022. REUTERS/Dado Rovich/Illustration

LONDON (Reuters) – Oil prices hit a nine-month low on Monday before recovering to stand higher on the day in volatile trading, as recession fears and a stronger dollar scared the market as participants awaited details of new sanctions on Russia. .

Brent crude futures for November settlement rose 72 cents, or 0.8%, to $86.87 a barrel, having earlier fallen as much as $84.51, the lowest since Jan. 14.

US West Texas Intermediate (WTI) crude for November delivery fell $77.21, the lowest since Jan. 6, but was last up 86 cents, or 1.1%, at $79.60.

Both contracts were down about 5% on Friday.

The turmoil caused by the Russia-Ukrainian war has hit the oil market, with European Union sanctions banning Russian crude due to start in December, along with a plan by G7 nations to cap Russian oil prices with the aim of reducing supply.

But Bloomberg reported on Monday that EU countries are struggling to agree to a price cap as some have raised objections, pushing prices into positive territory.

Meanwhile, the dollar index – which measures the US currency against a basket of major currencies – rose to its highest level in 20 years. A strong dollar tends to reduce the demand for oil, which is priced in the US currency.

Refinitiv Eikon data shows that the dollar’s strong impact on oil prices is most evident in over a year.

Meanwhile, interest rate increases imposed by central banks in many oil-consuming countries to combat soaring inflation have raised fears of an economic slowdown and accompanying stagnation in oil demand.

“With more and more central banks forced to take extraordinary action regardless of the cost to the economy, demand will take a hit that could help rebalance the oil market,” said Craig Erlam, chief market analyst at Oanda in London.

Attention is turning to what the Organization of the Petroleum Exporting Countries (OPEC) and its allies led by Russia, known together as OPEC+, will do when they meet on Oct. 5, having agreed at their previous meeting to modestly cut production.

However, OPEC+ is producing well below its target production, which means the additional cut may not have a significant impact on supply.

Data last week showed that OPEC+ missed its target by 3.58 million barrels per day in August, a larger deficit than in July. Read more

(Reporting by Noah Browning) Additional reporting by Mohi Narayan in New Delhi and Sonali Paul in Melbourne Editing by Kirsten Donovan

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