Title: Oil slips more than 1% on fears recession may hit demand

May 12, 2022 03:01AM ET

By: AnalysisWatch

Oil prices fell more than 1% on Thursday in a volatile week as economic concerns and recession fears kept global financial markets on edge, outweighed by supply worries and geopolitical tensions in Europe.

Brent crude futures fell $1.32, or 1.2%, to $106.19 a barrel by 02:46 AM ET. WTI crude futures fell $1.52, or 1.4%, to $104.19 a barrel.

Oil prices are under pressure this week, as are global financial markets, rattled by rising interest rates, the strongest U.S. dollar in two decades, inflation concerns and a possible recession. Continued The COVID-19 freezes in China, the world's largest crude oil importer, also impacted the market.

In the U.S., the consumer price index rose 8.3% in the 12 months to April, confirming fears that interest rates will need to rise quickly to curb inflation.

However, supply concerns stemming from Russia's invasion of Ukraine have bolstered the market, pushing prices up more than 35% so far this year. An impending European Union ban on oil from Russia, a major EU supplier of crude and fuel, which could further tighten global supplies, is supporting prices.

The EU is still haggling over the details of the Russia embargo. Unanimity is needed for a vote, but that has been delayed as Hungary opposes the ban, saying it would hurt its economy too much.

On Wednesday, oil prices jumped 5% after Russia sanctioned 31 companies based in countries that imposed sanctions on Moscow following its invasion of Ukraine.

This caused turmoil in the market, while at the same time, Russian natural gas supplies to Europe via Ukraine fell by a quarter. It was the first time exports via Ukraine had been disrupted since the invasion.

The price increase was limited by concerns about falling demand in China as the country tries to contain the spread of the coronavirus.