Brent below $100, a first since April

Oil prices continued their decline on Wednesday after falling the previous day, buoyed by recession fears and a slump in demand, with the two global crude oil benchmarks trading below $100 a barrel.

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At around 15:00 GMT (11:00 Paris), a barrel of North Sea Brent for delivery in September fell 3.00% to $99.69, slipping below the symbolic $100 a barrel for the first time since April.

The barrel of American West Texas Intermediate (WTI), scheduled for delivery in August, fell 3.18% to $96.34, also its lowest level since April.

On Tuesday, the two crude oil benchmarks had seen their largest daily decline since March.

“Brent prices posted the third largest absolute drop since the futures contract began trading in 1988,” say analysts at UBS, as Brent fell 9.45% at the close after falling nearly 11%.

“Recession fears are likely to have prompted some investors to exit the oil market,” which was seen as a way to benefit from inflation, say UBS analysts.

“In addition to growing pessimism about the future of the economy, oil prices have also been impacted by the strengthening dollar,” said PVM Energy’s Stephen Brennock.

A significant appreciation of the greenback weighs on black gold as it weakens the purchasing power of investors holding other currencies.

Crude oil prices have now crossed an important psychological level for Fawad Razaqzada, an analyst at City Index interviewed by AFP.

In a recession scenario, Citi analysts even mentioned that oil prices would fall to $65 a barrel by the end of the year, then $45 if the Organization of the Petroleum Exporting Countries and its allies (OPEC+) didn’t intervene.

However, analysts insist that no fundamental changes have rocked the oil market since Tuesday.

Black gold supplies continue to be tested, with production disruptions in some producing countries.

For Stephen Brennock, oil prices should even recover after the “bloodbath” of the previous day.

“On the one hand, a recession could easily reduce demand for oil. On the other hand, supply remains tight,” summarizes Russ Mold, analyst at AJ Bell.

Threats of a strike to penalize oil production in Norway eased after government intervention. On Tuesday, oil sector bosses warned that extending a strike could drastically reduce production, with gas exports down 56% and the loss of 341,000 barrels of oil a day.

Uncertainty is emerging regarding OPEC+’s ability to produce more crude oil.

The alliance reiterated its “concerns about capacity problems due to years of underinvestment and the impact of Russia’s import bans,” said Hargreaves Lansdown’s Susannah Streeter.

“OPEC’s reserve capacity (…) has fallen to its lowest level in years,” said Stephen Brennock.

No relief should come from Iranian oil, which is still under American sanctions either, as the last indirect talks in Doha between Iranians and Americans did not bring the expected results.

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