International oil price drops as recession fears heighten concerns over fuel demand

Oil prices fell on Tuesday, reversing earlier gains, as fears of a possible global recession slashing demand for fuel outweigh fears of supply disruption, highlighted by an expected production cut in Norway.

Brent crude fell $1.49, or 1.3%, to $112.01 a barrel at 10:20 GMT.

U.S. West Texas Intermediate (WTI) crude fell 15 cents, or 0.1%, to $108.28 a barrel, from Friday’s close. There was no settlement for WTI on Monday due to the Independence Day holiday in the United States.

“Oil is still struggling to emerge from its current recessionary malaise as the market moves away from inflation towards economic desperation,” Stephen Innes of SPI Asset Management said in a note.

Investors are increasingly worried as the latest spike in gasoline and fuel prices has added to worries about a recession.

In South Korea, inflation in June hit a nearly 24-year high, heightening fears of slowing economic growth and oil demand.

Data showed business growth in the eurozone slowed further last month, with forward-looking indicators suggesting the region could decline this quarter as the cost-of-living crisis keeps consumers wary.

However, supply issues still loomed. Earlier in the session, WTI rose over $3 and Brent rose over $1 on reports of production disruptions in Norway.

Norwegian offshore workers have started a strike that will cut oil and gas production, the union leading the industrial action told Reuters.

The strike is expected to cut oil and gas production by 89,000 barrels of oil equivalent per day (boepd), of which gas production accounts for 27,500 boepd, Norwegian producer Equinor said.

“Oil prices (…) are benefiting from the strike in Norway, which has so far had only a modest impact on volumes, and the sharp increase in official Saudi selling prices for the month of August, suggesting that Saudi exports may not rise as much next month,” said UBS analyst Giovanni Staunovo. said.

Saudi Arabia, the world’s top oil exporter, lifted crude oil prices in August for Asian buyers to near record highs amid tight supply and robust demand.

The Official Selling Price (OSP) for Arab Light loaded in August to Asia was raised by $2.80 a barrel from July to $9.30 a barrel compared to Oman/Dubai quotes, said people familiar with the matter, close to the record premium of $9.35 a barrel. struck in May.

“We believe that corrections in the energy market during the second quarter could end up being short-lived, with the risk of a prolonged period of high prices being the most likely outcome,” said Ole Hansen, head of of commodity strategy at Saxo Bank, adding prices. would trade in a wide range of $100 to $125.

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