Oil prices are falling sharply

Oil prices tumbled on global markets, falling more than 11 percent last week to their lowest levels this year as traders fear a recession and weakening demand for the black gold.

The price of a barrel on the London market last week sank by 11.1 percent to $76.10, while on the American market the barrel fell by 11.2 percent to $71.02.

Early last week, oil prices rose as the European Union embargo on Russian oil shipped by ship came into effect. In addition, the Union together with the G7 members set a limit on the price of Russian oil, $60, in order to reduce Russian revenues from the sale of oil.

The Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, at the regular meeting confirmed the decision to cut production by two million barrels per day. All this supported the prices of “black gold”. However, since mid-week, oil prices have been under pressure following weak economic indicators from the US, China and Europe.

Fear that the US will sink into recession

In addition, traders fear that the US economy, the world’s biggest oil consumer, will slip into recession, as the heads of several major banks and many analysts have warned. According to them, the only question is whether the recession will be shallow or deeper. This is the result of high inflation, which is why the US central bank has been aggressively raising key interest rates since the beginning of the year.

The Fed’s last meeting of the year takes place this week, and after a series of 0.75 percentage point interest rate hikes, the market expects the central bank’s leaders to raise interest rates by 0.50 percentage points.

The British and European central banks will hold meetings this week. Both are expected to further raise interest rates by 0.50 percentage points, which should weaken inflation. But higher borrowing costs will slow economic activity, which will mean weaker demand for oil.

Due to Russia’s attack on Ukraine, the price of oil rose sharply in March and at one point reached $140 a barrel, the highest level since 2008. However, as central banks around the world began aggressively raising interest rates due to high inflation, oil prices gradually returned to pre-Russian invasion levels.

However, in recent days oil prices have hovered around the lowest levels this year.