Following a steep decline last week, oil prices remained close to eight-month lows on Monday as investors worried that a weakening global economy would reduce demand for petroleum.
By 21:30 E.T., U.S. West Texas Intermediate futures were steady at $78.67 per barrel, and London-traded Brent oil futures were up 0.3% to $85.29 per barrel (01:30 GMT). Both futures carried significant losses from the previous week and were trading slightly over their worst level in eight months. Prices reduced early Monday gains as data on Japanese business activity revealed that manufacturing activity in the second-largest economy in the world expanded more slowly in September than it had the month before.
The figure followed last week’s gloomy economic activity statistics from the Eurozone and the U.K., which increased concerns about a possible global recession. Following the dismal economic indicators last week, oil prices plunged.
Will the Global Economy Bring Oil Down?
Investors worry that a downturn in economic activity would reduce oil demand due to high inflation and increasing interest rates. Based on that idea, crude prices have collapsed from highs reached during the start of the Russia-Ukraine war. Oil prices were also impacted by the dollar’s strength, trading near 20-year highs. DA’s rising dollar weakens demand since imported crude is often more expensive.
India and Indonesia, two important Asian importers, are hampered by the strengthening dollar. The world’s top crude importer, China, has seen an economic downturn this year, which has significantly impacted demand.
Last week, the Organization of Petroleum Exporting Countries threatened to limit output, but this did little to stop drops in crude. Prices only briefly rose in response to reports of a probable flare-up in the Russia-Ukraine war, which should impair the world’s supply of petroleum.
Nevertheless, traders continue to anticipate an improvement in crude demand in the fourth quarter, particularly in the case of a severe European winter that would increase demand for heating oil. The demand for gasoline in the United States is also anticipated to increase as fuel costs decline further from recent highs.