Oil drops to 12-week low on recession, COVID-19 worries

NEW YORK — Oil prices dropped to a 12-week low in volatile trade on Wednesday, extending Tuesday’s heavy losses as growing fears of demand destruction from a global recession outweighed supply concerns.

Brent futures for September delivery fell $2.99, or 2.9 per cent, to $99.78 a barrel by late morning Wednesday, while U.S. West Texas Intermediate (WTI) crude fell $3.19, or 3.2 per cent, to $96.31.

That puts WTI and Brent on track for their lowest closes since April 11, after Brent fell 9 per cent and WTI fell 8 per cent on Tuesday.

It also put both benchmarks in technically oversold territory with a relative strength index (RSI) below 30 for a second day in a row. If Brent closes at that level, it would be the first time it remains in oversold territory for two days since December 2021.

Investment bank Goldman Sachs said the oil sell-off was driven by growing recession fears.

U.S. stock indexes slipped on Wednesday as investors awaited minutes from the Federal Reserve’s meeting to gauge the health of the economy and the pace of interest rate hikes to stamp out spiking inflation.

In China, the world’s biggest oil importer, the market worried that new COVID-19 lockdowns could cut demand.