- Oil prices slumped Friday and were on course to lose ground for the week.
- WTI crude oil fell to a nine-month low and traded just above $80 a barrel.
- 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 3.8% to $80.35 per barrel, the lowest price since January. The decline was later trimmed to 3.4%. Brent crude, the international benchmark, lost 3.2% to $87.41, its lowest price since January.
WTI was veering toward a weekly loss of more than 5% and Brent headed for a decline of more than 4% for the week.
"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," 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 Bank of England and the central banks of Norway and Switzerland 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 also hurt stock markets in Europe and Asia on Friday and US stock futures were in the red.
Oil prices were also lower as the US Dollar continued to march higher. The US Dollar Index rose 0.8% 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 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 more than 2% 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.