Oil prices hit nine-month lows on Monday, driven down by an expected decline in fuel demand as rising interest rates raise the likelihood of global recession, with further price pressure coming from a surging U.S. dollar.
Brent crude futures for November settlement slipped by 82 cents, or 1%, to $85.33 a barrel at 1110 GMT. The contract fell as low as $84.51, the lowest since Jan. 14.
U.S. West Texas Intermediate (WTI) crude for November delivery dropped 74 cents, or 0.9%, to $78. WTI dropped as low as $77.21, the lowest since Jan. 6.
Both contracts slumped by about 5% on Friday.
The dollar index that measures the greenback against a basket of major currencies climbed to a 20-year high on Monday. A stronger dollar tends to curtail demand for dollar-denominated oil.
The impact of a strong dollar on oil prices is at its most pronounced in more than a year, Refinitiv Eikon data shows.
Meanwhile, interest rate increases imposed by central banks in numerous oil-consuming countries to fight surging inflation has raised fears of an economic slowdown and accompanying slump in oil demand.
“A backdrop of global monetary policy tightening by the key central banks to quell elevated inflation, and a splendid run-up in the greenback towards more than two-decade highs, has raised concerns about an economic slowdown and is acting as a key headwind for crude prices,” said Sugandha Sachdeva at Religare Broking.
Disruptions in the oil market from the Russia-Ukraine war, with European Union sanctions banning Russian crude set to start in December, has lent some support to prices.
Attention is turning to what the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, together known as OPEC+, will do when they meet on Oct. 5, having agreed at their previous meeting to cut output modestly.
However, OPEC+ is producing well below its targeted output, meaning that a further cut may not have much impact on supply.
Data last week showed OPEC+ missed its target by 3.58 million barrels per day in August, a bigger shortfall than in July.
