Brent crude oil prices fell to $85 a barrel on rising recession fears and a stronger dollar

Earlier in the day, Brent futures for November settlement fell to $84.53 before recovering slightly. Similarly, West Texas Intermediate futures were trading at $80. Last Friday, Brent and WTI futures fell 5% to their lowest level since January 2022.

Central banks around the world have begun to aggressively raise interest rates in an effort to rein in runaway inflation. In addition, overall market sentiment continues to deteriorate. Ole Hansen, head of commodity strategy at Saxo, said:

“The relentless pressure on commodities, including crude oil, continues after Friday’s lackluster session that saw accelerating dollar strength and growth pessimism send shockwaves through the markets. WTI is trading below $80 a barrel, while a return to the mid-80′s for Brent could soon see OPEC+ act to support prices.”

Russia has warned that it will not supply raw materials to nations supporting the crude price cap. The country is currently under sanctions after its invasion of Ukraine earlier this year in February. Since then, it has dictated fuel and gas flows to Europe, which is Russia’s main market.

Fears of a recession in U.S. markets are growing. Steve Hanke, a professor of applied economics at Johns Hopkins University, said the probability of the U.S. entering a recession is nearly 80 percent.

Speaking on CNBC last Friday, Hanke said:

“If [la Fed] continues quantitative tightening and moves the growth rate and M2 (money supply) into negative territory, the situation will be serious.”

When will crude oil prices stabilize?

As Russia ramps up its troops to fight Ukraine, the biggest question remains when will crude find support? Vivek Dhar, analyst at Commonwealth Bank, said:

“That’s really the big question mark for oil in the next few quarters’ forecasts – how do weaker demand projections weigh against EU sanctions. It’s always going to be difficult for the market to find oil to replace Russian supply.”

As crude prices continue to plunge, analysts are eager to watch the actions of OPEC, the Organization of Petroleum Exporting Countries. The sharp decline in the crude market could lead to further intervention by OPEC.

It will be interesting to see how macroeconomic conditions change in the coming months.