By Barani Krishnan
Investing.com – It’s back, the buzzword most hated by oil longs.
Recession, or the ‘R’-word as it has come to be known, was omnipotent across commodity markets on Friday, sending to 2½-year lows while setting up ‘black gold’, or oil, for its worst weekly loss in seven as U.S. crude broke below $80 per barrel the first time since January.
Global equities at a two-year low, the at 20-year highs, weak European purchasing managers indexes, and growth concerns from this week’s rate hikes by the to the made it a perfect storm for oil bulls.
“The market is clearly thinking economic slowdown,” said Scott Shelton, energy futures broker at ICAP in Durham, North Carolina.
“Whether or not physical [oil] grades are strong or weak matters not currently,” Shelton added, referring to warnings from long-leaning analysts that risk of war escalation in Ukraine by Russia and China’s opening up from COVID lockdowns could mean plenty of upside for oil in the coming weeks.
New York-traded , which serves as the U.S. crude benchmark, was down $5.07, or 6.1%, to $78.42 per barrel by 10:55 ET (14:55 GMT). WTI earlier sank to a session low of $78.22.
For the week, WTI was down almost 8%, heading for its worst week since the end of July.
, the London-traded global benchmark for oil, was down $4.72, or 5.1%, to $85.85, versus its intraday low of $85.51.
For the week, Brent was also down about 5%, heading for its worst week since the end of August.
“Central banks now appear to accept that a recession is the price to pay for getting a grip on inflation, which could weigh on demand next year,” said Craig Erlam, analyst at online trading platform OANDA.
“At the same time, the market still remains tight and OPEC+ is perfectly willing to restrict supply further even as it fails to deliver on quotas it has set itself so far. What’s more, a nuclear deal between the US and Iran looks no closer and Russia’s mobilization could pose a risk to its supply.”
Considering all these, “very little is probably priced in at this point,” Erlam added.
The European Union ratcheted up, on Thursday, its plans to put a cap on the price of Russian oil — a measure aimed at weakening Moscow’s ability to fund the war in Ukraine.
Nigeria’s Oil Minister Timipre Marlin Sylva, speaking on behalf of producer alliance OPEC+, meanwhile, threatened a cut in global crude output if prices continued to fall.
Neither announcement made much of an impact on the market.