Oil prices drop Due to Recession Concerns and China COVID issues.


On Tuesday, An increase in oil price declines of more than 1%, adding to losses of almost 2% from the previous day as concerns about global demand were increased by recession fears and a spike in COVID-19 cases in China.

On Monday, Kristalina Georgieva, the managing director of the International Monetary Fund, and World Bank President David Malpass both issued dire warnings about the threat of a global recession and continued inflation.

  • The World Bank and IMF note rising risks of a worldwide recession.
  • Fears of rate hikes boost the dollar, which hurts oil.
  • Reduction in output target limitations due to OPEC+

By 14:30 GMT, Brent crude had dropped $2.16, or 1.6%, to $94.03 per barrel. To $89, U.S. West Texas Intermediate crude fell $2.18, or 2.34%.

Oil Fell Sharply on to Demand Concerns

According to Craig Erlam of the brokerage OANDA, “there is growing pessimism in the markets right now.”

After rising earlier in 2022, when Brent came very close to its record level of $147 as Russia’s invasion of Ukraine increased to supply concerns, oil has fallen drastically on economic concerns.

When it comes to global economic growth, “warnings after warnings are being sent,” according to Avatrade analyst Naeem Aslam.
Aside from those concerns, worry about a potential decline in Chinese demand weighed heavily. As COVID-19 cases are once again on the rise, authorities in Shanghai and other major cities have increased coronavirus testing.

A strong dollar that reached multi-year highs on concerns about interest rate increases and an intensification of the Ukraine crisis put pressure on oil prices.

Oil is more costly for buyers using other currencies when the dollar is strong, and risk appetite is typically affected.

The Organization of the Petroleum Exporting Countries (OPEC) and its partners, including Russia, together known as OPEC+, decided last week to decrease their output target by 2 million barrels per day, which helped to contain losses.