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Oil falls below $80 en route to biggest run of weekly losses this year

Sept. 23, 2022 Updated Fri., Sept. 23, 2022 at 8:42 p.m.

Oil well pump jacks operated by Chevron Corp. are shown in San Ardo, California, on April 27, 2021.   (David Paul Morris/Bloomberg )
Oil well pump jacks operated by Chevron Corp. are shown in San Ardo, California, on April 27, 2021.  (David Paul Morris/Bloomberg )
By Julia Fanzeres </p><p>and Ilena Peng Bloomberg

Oil headed for the longest stretch of weekly losses this year as central banks around the world stepped up their fight against inflation at the cost of growth.

West Texas Intermediate dropped below $80 a barrel on Friday for the first time since January and was set for a fourth week of declines.

The Federal Reserve this week gave its clearest signal yet that it’s willing to tolerate a U.S. recession as the trade-off for regaining control of inflation, while the U.K., Norway and South Africa also raised rates.

“The fears of a hard landing for the U.S. economy and across the global economy are working its way into the system,” said John Kilduff, founding partner at Again Capital.

Using interest rates like “a mallet to the global economy” may curtail economic activity to a terrific degree, he said. “That’s why you’re seeing the selloff.

It’s putting crude on track for its first quarterly loss in more than two years.

Prices are also being pushed lower by a surging dollar – with the Bloomberg Dollar Spot Index rising to a record high on Friday – making commodities priced in the currency more expensive for investors.

If crude declines further, the Organization of Petroleum Exporting Countries may be forced to cut output, said Nigeria’s Oil Minister Timipre Sylva.

The group and its allies earlier this month agreed to the first supply reduction in more than a year.

There could be further turmoil ahead with a looming EU ban on Russia oil.

Separately, member states are racing to clinch a political agreement within weeks that would impose a price cap on Russian oil.

The push gained momentum after President Vladimir Putin this week announced a mobilization of troops, escalating the war in Ukraine.

WTI for November delivery retreated $4.97 to $78.52 at 11:53 a.m. in New York. Brent for the same month declined $4.53 to $85.93.

Some of the world’s biggest banks are forecasting a rebound in prices because of low inventories, and sustained demand despite recession concerns.

JPMorgan Chase & Co. forecasts Brent at $101 a barrel for the final quarter of 2022, while Goldman Sachs Group Inc. sees $125.

“This is going to be a very, very volatile last quarter,” Amrita Sen, chief oil analyst at Energy Aspects Ltd., said in a TV interview.

There are “just too many different and contradictory factors driving prices right now,” she added.

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