Oil prices slumped Friday, with WTI crude giving up 6% during the session.
WTI crude oil traded below $80 a barrel for the first time since January.
Fears about global recession ramped up after this week's round of rate hikes by central banks.
Oil prices on Friday tumbled to a nine-month low as recession fears swept throughout global risk assets and the US dollar continued this year's ascent to reach a fresh two-decade high against major currencies.
West Texas Intermediate crude fell as much as 6.1% to $78.42 per barrel, the first break below $80 a barrel since January 11. Brent crude, the international benchmark, lost 5.3% to $85.50, its lowest price since January 24.
WTI and Brent crude were veering toward steep weekly losses, of about 8% and 7%, respectively.
"The threat of a global recession continues to weigh on oil prices, with widespread monetary tightening over the last couple of days fueling fears of a significant hit to growth," said Craig Erlam, senior market analyst at Oanda, in a note. "Central banks now appear to accept that a recession is the price to pay for getting a grip on inflation, which could weigh on demand next year."
The Federal Reserve on Wednesday and the central banks of the UK, Norway and Switzerland on Thursday each raised interest rates to deal with elevated inflation as prices for energy and food have increased this year. The Federal Open Market Committee in aiming to slow activity in the world's largest economy is expected to stretch its rate-hiking cycle into 2023 and foresees hitting a peak interest rate of 4.6%.
Recession worries hurt stock markets in Europe, Asia, and the US on Friday. The S&P 500 dropped by nearly 2%.
Oil prices were also lower as the US dollar continued to march higher. The US Dollar Index flew up by more than 1% on Friday, pushing past 112 to reach a fresh 20-year high. Dollar-denominated oil prices can be hurt by gains in the greenback's value as it makes the commodity more expensive to purchase by holders of foreign currencies.
The dollar index, which tracks the greenback's performance against the euro, the Japanese yen, the British pound, the Canadian dollar, the Swedish krona, and the Swiss franc, was on course to rise by nearly 3% this week. The gains were fueled by the Fed's rate hike this week of 75 basis points, the third consecutive meeting to mark a jumbo-sized increase in the fed funds rate. Rising Treasury yields on the back of the Fed's latest rate hike have fueled demand for dollars.
Meanwhile, European Union officials are rushing to reach a deal on capping prices for Russian oil after President Vladimir Putin stepped up Moscow's aggression against Ukraine, according to a Bloomberg report Friday. The EU's embargo on seaborne Russian crude is set to start on December 5.
Global oil supplies remain tight but the proposed price cap might lead to a lower supply of Russian oil, UBS Global Wealth Management said Friday.
"Officials in the Kremlin, including deputy prime minister Alexander Novak, have pointed out that Russia would not sell oil to countries adhering to a price cap," Mark Haefele, CIO of UBS Global Wealth Management, said in a note. "We see this as a credible threat, and if Russia were to withhold barrels from the market, we think oil prices could move above $150/bbl for an extended period."
The firm's base case is for oil prices to rise to $110 barrels by the end of 2022 and to $125 a barrel by March.
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