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Oil down as global economic downturn leads to weak demand fears

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CALIFORNIA, USA: An oil well is seen at an oil facility by the Highway 5 near Bakersfield in California, United States on November 27, 2022. (Tayfun Coşkun - Anadolu Agency)
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Jan 04, 2023 - 10:29 AM

ANKARA (AA) – Oil prices slumped on Wednesday after diving more than 4% during the previous trading session as the global recession is expected to cool down oil consumption.

International benchmark Brent crude traded at $81.74 per barrel at 09.56 a.m. local time (0656GMT), down 0.43% from the closing price of $82.10 a barrel in the previous trading session.

American benchmark West Texas Intermediate (WTI) traded at $76.50 per barrel at the same time, a 0.55% loss after the previous session closed at $76.93 a barrel.

Both benchmarks recorded rapid declines, with Brent losing almost $5 a barrel during Tuesday’s choppy trading session.

The weaker demand worries put downward pressure on prices, especially after the IMF’s Managing Director Kristalina Georgieva said one-third of the world’s economies are expected to go into recession in 2023.

“Even countries that are not in recession, it would feel like recession for hundreds of millions of people,” Georgieva told CBS news on Sunday.

The year ahead will be tougher than 2022 for most of the world economy as the US, EU, and China are slowing down, said Georgieva.

Noting that the EU was hit “very severely” by the ongoing war in Ukraine, Georgieva said half of the bloc would be in recession this year.

She added that the outlook for emerging markets in developing economies was even direr due to interest rate hikes and a strong US dollar.

Adding more to demand worries, the world’s second-largest economy China significantly increased its first batch of 2023 export quotas for refined oil products, which shows that the country is expecting less consumption.

The country is also struggling with rising COVID-19 cases when it decided to ease its strict mitigation measures.

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