(Bloomberg) -- Oil dropped for a third day on escalating concerns about a global slowdown, with US President Joe Biden saying a recession was possible.
West Texas Intermediate fell below $89 a barrel after losing more than 3% over the past two sessions. Biden’s comments to CNN, in which he downplayed the risks, followed similar gloomy assessments about the outlook from the International Monetary Fund and JPMorgan Chase & Co. boss Jamie Dimon.
Crude hit the lowest level since January last month, only to rebound after the Organization of Petroleum Exporting Countries and its allies agreed to cut oil supply. Those gains are now unraveling as the Federal Reserve hikes rates to tackle inflation, slowing growth while aiding the dollar. In addition, persistent efforts in China to contain Covid-19 threaten demand in the top oil importer.
“Oil is struggling on the back of the IMF growth downgrade, China lockdowns, and US hard-landing worries,” said Stephen Innes, managing partner of SPI Asset Management. “Any breakdown in risk assets may continue to hurt oil prices until some semblance of a bottom forms.”
In his interview, Biden voiced his fury at Saudi Arabia over last week’s decision by OPEC+ to reduce nominal production by 2 million barrels a day, accusing the kingdom of allying itself with Russia as Moscow presses on with its invasion of Ukraine. The president said he’d rethink relations with Riyadh.
The stronger US dollar is adding to bearish headwinds for oil, with a Bloomberg gauge of the greenback rising for a sixth day toward a record. That makes commodities priced in the currency more expensive for overseas buyers.
Investors are in line for a wave of oil market intelligence over the coming days as OPEC, the International Energy Agency, and the US Energy Information Administration all release outlooks. The reports will shed light on demand trends into 2023 and the likely impact of sanctions on Russian crude flows.
“A backdrop of recessionary concerns and oil demand downgrades usually makes it difficult for the oil market to sustain any significant price rally,” Standard Chartered Plc said in a note. “This week’s oil-balance reports are likely to turn market attention back toward a weakening demand outlook.”
Key time spreads have eased in recent days. Brent’s prompt spread -- the difference between the two nearest contracts -- was at $1.78 a barrel in backwardation, down from above $2 on Friday.