Analysts also question whether prices can overcome a high U.S. dollar: File Image/Pixabay
A combination of fear over the potential impact of rising interest rates combined with the U.S. dollar trading at an all-time high spelled more bad news for oil prices on Monday, with Brent settling below $85 per barrel and West Texas Intermediate remaining under $80.
This comes in the wake of both Brent and WTI on Friday falling around 5 percent, and Amrita Sen, co-founder and director of research at Energy Aspects, noted that the drop is a "macro move led by a stronger dollar," which is triggering fears of a recession.
Ole Hansen, head of commodity strategy at Saxo, added, "The unrelenting pressure on commodities, including crude oil, continues following Friday's gloomy session which saw accelerated dollar strength and growth pessimism cause a ripple through markets."
Bob Yawger, director of energy futures, Mizuho
It's hard for anyone to expect oil will recover
The dollar index on Monday hit a two-decade high, and this inspired Bob Yawger, director of energy futures at Mizuho, to remark, "It's hard for anyone to expect oil will recover in the wake of a greenback this expensive."
Traders were also said to be influenced by the European Union waffling on its commitment to enact price caps on Russian oil, claiming they will likely push back the deal until a broader sanctions package has been agreed on.
According to people familiar with the EU talks, Cyprus and Hungary are among the countries expressing opposition to the oil cap proposal, even though the call for action has intensified in the wake of Russian president Vladimir Putin announcing a "partial mobilization" of troops last week and reports of Ukrainian forces uncovering a mass grave in Izyum, which had been controlled by Russia.
Brent for November settlement settled down $2.09 to $84.06 per barrel, while WTI for November delivery settled down $2.03 to $76.71 per barrel (the lowest since Jan. 6).
The slump is especially troublesome for the Organization of Petroleum Exporting Countries (OPEC), which earlier this month said it will impose additional output cuts if crude prices continue their downward trajectory (because the drop in prices is adversely affecting the budgets of some of its members); analysts expect the cartel may soon intervene, either verbally or by announcing a reduction in output.
Oil is on track for a substantial quarterly slump in the wake of leading central banks around the world raising interest rates to fight inflation, which analysts fear will hurt energy demand despite all signs pointing to a global supply shortfall heading into winter.
For his part, Steve Hanke, professor of applied economics at Johns Hopkins University, told
media the chance that the U.S. will fall into recession stands at 80 percent: "If [the Fed] continue[s] the quantitative tightening and move that growth rate and M2 [money supply] into negative territory, it'll be severe."