Oil falls more than 1%, affected by fears of economic recession

Oil prices fell more than 1% on Thursday in a volatile week, as economic concerns and fears of a recession weighed negatively on global financial markets, outweighing concerns about supplies and tension in Europe.

Brent crude futures fell $1.25, or 1.2 percent, to $106.26 a barrel by 0303 GMT. US West Texas Intermediate crude futures fell $1.24, or 1.2 percent, to $104.47 a barrel.

Oil prices are under pressure this week, along with global financial markets, amid concerns about rising interest rates, the dollar’s rise to a two-decade high, and worries about inflation and a possible recession. The prolonged lockdown to combat COVID-19 in China, the world’s largest importer of crude, has also affected the market.

However, the market received a boost thanks to supply concerns stemming from the Russian invasion of Ukraine, with prices rising more than 35 percent since the start of the year. Prices are also receiving support from a ban under consideration in the European Union for Russian oil, a major supplier of crude and fuel to the bloc, which could lead to a further decline in global supplies.

The European Union is still haggling over the details of the Russian embargo. Passing the ban needs consensus, and it has been postponed because Hungary opposes the ban because it would be very damaging to its economy.

Oil prices jumped 5 percent on Wednesday after Russia imposed sanctions on 31 companies in countries sanctioned after the invasion of Ukraine.

This led to market anxiety as the flow of Russian natural gas to Europe through Ukraine fell by a quarter. This is the first time that exports through Ukraine have been disrupted since the invasion.

Concerns about deteriorating demand in China, which is trying to curb the spread of the Coronavirus, also curbed the rise in prices.

The US Energy Information Administration said on Wednesday that commercial crude stocks in the United States rose last week due to a record withdrawal of oil from the strategic reserves, but gasoline stocks fell ahead of the demand for the peak summer driving season.