Oil prices fall near to 2022 lows due to economic concerns, alleviating

Brent crude fell near to its yearly low on Wednesday, weighed down by recession fears and fading concerns that a Western cap on Russian oil prices would drastically reduce supply.

Large U.S. banks' warnings about the likelihood of a recession next year weighed on and supported the U.S. dollar. A higher dollar makes oil more expensive for foreign currency holders and tends to decrease the appetite for risk assets.

At 10:20 GMT, Brent crude slid $1.05, or 1.3%, to $78.30 a barrel. Earlier, it reached $77.74, the lowest level since January 3. U.S. crude fell $1.24, or 1.7%, to $73.01 and reached a low of $72.25 not seen since late December.

Claudio Galimberti, senior vice president at Rystad Energy, remarked, "There is still a great deal of uncertainty in the markets today," adding that crude oil production in Russia may not decline as much as anticipated.

Brent fell below $80 on Tuesday for only the second time in 2022, erasing the year's gains that had pushed prices near to the all-time high of $147 in March, following Russia's invasion of Ukraine.

Concerns that the price restriction on Russian crude could produce a supply shock were diminishing. As a countermeasure to the cap imposed by Western nations, Russia is reportedly contemplating options such as prohibiting oil sales to certain countries, as reported by the Vedomosti newspaper on Wednesday.

"The geopolitical risk premium has mostly vanished, but inflation concerns remain," said PVM, an oil dealer. Clearly, investors are not at all concerned about the possibility of a supply crisis as a result of the price restriction and the EU ban on Russian oil exports.

Optimism for a Chinese demand recovery contributed to some price support.

China announced on Wednesday the most extensive modifications to its anti-COVID policy since the beginning of the pandemic, easing restrictions that halted the spread of the virus but crippled the world's second-largest economy and caused protests.

According to market sources, the American Petroleum Institute released a report on Tuesday indicating that oil inventories decreased by approximately 6.4 million barrels.

Focus is on the latest U.S. supply report due at 15:30 GMT from the Energy Information Administration and if it confirms the huge fall in crude inventories.