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Oil falls on fears of global recession, China COVID flare-up
Published by Jessica Weisman-Pitts
Posted on October 11, 2022
2 min readLast updated: February 3, 2026
Global Banking & Finance Review®
Company
Published by Jessica Weisman-Pitts
Posted on October 11, 2022
2 min readLast updated: February 3, 2026
By Laura Sanicola
(Reuters) – Oil prices fell about 2% on Tuesday, extending the previous session’s almost 2% decline, as recession fears and a flare-up in COVID-19 cases in China raised concerns over global demand.
World Bank President David Malpass and International Monetary Fund Managing Director Kristalina Georgieva warned on Monday of a growing risk of global recession and said inflation remained a continuing problem.
Brent crude was down $1.62, or 1.7%, to $94.57 a barrel by 12:14 p.m. EDT (1614 GMT). U.S. West Texas Intermediate crude dropped $1.72, or 1.9%, to $89.41.
“There is growing pessimism in the markets now,” said Craig Erlam of brokerage OANDA.
Oil has dropped sharply on economic fears after surging earlier in 2022, when Brent came close to its record high of $147 as Russia’s invasion of Ukraine added to supply concerns.
Fears of a further hit to demand in China also weighed. Authorities have stepped up coronavirus testing in Shanghai and other large cities as COVID-19 infections rise again.
“From an economic perspective, it seems like China’s throwing the baby out with the bathwater by continuing to lock down its population to lower cases,” said John Kilduff, partner at Again Capital LLC in New York.
Oil also came under pressure from a strong dollar, which hit multi-year highs on worries about interest rate increases and escalation of the Ukraine war. [USD/]
A strong dollar makes oil more expensive for buyers with other currencies and tends to weigh on risk appetite.
Losses were limited, however, by a tight market and last week’s decision by the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, together known as OPEC+, to lower their output target by 2 million barrels per day.
President Joe Biden is re-evaluating the U.S. relationship with Saudi Arabia after OPEC+ announced last week it would cut oil production, White House national security spokesman John Kirby said on Tuesday.
“An undersupply is even looming next year because the production cut is supposed to apply until the end of 2023, according to the OPEC+ decision,” a Commerzbank report said.
(Additional reporting by Alex Lawler; Additional reporting by Isabel Kua; Editing by Paul Simao and Mark Potter)
A global recession is a period of economic decline that affects multiple countries, characterized by falling GDP, rising unemployment, and reduced consumer spending.
The Organization of the Petroleum Exporting Countries (OPEC) is a group of oil-producing countries that coordinate their oil production policies to manage oil prices and supply.
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power and typically measured by the Consumer Price Index (CPI).
A strong dollar refers to a situation where the U.S. dollar has a high value compared to other currencies, making imports cheaper and exports more expensive.
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