Oil Tumbles on Recession Fears, US Crude Below $80 After Almost 8% Drop on Week

NEW YORK (Sputnik) - Oil prices tumbled on Friday as recession fears gripped global markets, with investors sending US crude below the key $80 per barrel mark after a near 8% loss on the week.

West Texas Intermediate crude, the benchmark for US oil, settled down Friday’s trade at $78.74 per barrel, down $4.75, or 5.7%, on the day.

For the week, the so-called WTI crude was down 7.5% amid risk-aversion across markets after central banks from the Federal Reserve to the Bank of England raised interest rates sharply this week in a desperate bid to fight inflation.

"WTI is inching closer to the 100-Week SMA of $77.50 with today's low of $78.14," Sunil Kumar Dixit, chief technical strategist at SKCharting.com, said, referring to US crude’s Simple Moving Average. "Some additional drop beyond the support is not ruled out."

Brent, the London-traded global benchmark for oil, settled at $86.15, down $4.31, or 4.8% on the day, after an intraday drop to $85.51.

For the week, Brent was down 5.7% for its biggest weekly decline since the end of August.

"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," Craig Erlam, analyst at online trading platform OANDA, said.

This is despite the market remaining tight on supply and producer group OPEC+ appearing willing to cut output further, even without delivering on export quotas it has set for itself.

"What's more, a nuclear deal between the US and Iran looks no closer, and Russia's mobilization [to support its military operation in Ukraine] could pose a risk to supply," Erlam said, adding that considering all these, "very little is probably priced in at this point" into oil risks.

The European Union ratcheted up, on Thursday, its plans to put a cap on the price of Russian oil — a measure aimed at weakening Moscow's ability to fund its military campaign in Ukraine.

Nigeria's Oil Minister Timipre Marlin Sylva, speaking on behalf of producer alliance OPEC+, meanwhile, threatened a cut in global crude output if prices continued to fall.

Neither announcement made much of an impact on the market.