Oil tumbles on recession worries as US stocks rebound

Oil prices have been hammered by demand fears as traders grow increasingly worried about a possible recession. ©AFP

New York (AFP) - US oil prices finished Wednesday at their lowest level since January on growing recession fears, while US stocks rebounded after a weak stretch left the market "oversold," as analysts put it.

Oil prices briefly climbed early on Wednesday as Russia's President Vladimir Putin said his country would stop delivering oil and gas supplies to countries that introduce price caps.

But then oil prices then turned sharply lower, with Brent crude, the main international contract, passing under $90 per barrel for the first time since February.

US benchmark West Texas Intermediate slid 5.7 percent to end at $81.94, its lowest closing price since January.

"The oil market is a blood bath as the crude demand outlook took a major hit after Chinese and US trade data showed global demand is sharply weakening," said Oanda's Edward Moya.

"It appears the risk of losing Russian energy supplies is no longer keeping oil prices supported and that has energy traders solely fixated on the demand side drivers."

Recession concerns also dampened sentiment towards equities, but Briefing.com analyst Patrick O'Hare said those worries were competing for investors' attention with "the idea that the stock market is oversold on a short-term basis and due for a bounce".

US stocks finished firmly higher, with the S&P 500 winning 1.8 percent.

On Wednesday, Federal Reserve Vice Chair Lael Brainard warned that the US central bank will stay the course on its aggressive fight against high inflation "for as long as it takes" to bring prices down.

She said interest rates need to rise further, again knocking down hopes of a rate cut next year as the economy slows.

The aggressive Fed posture has bolstered the dollar, which rose further against the Japanese yen even as it retreated against the euro.

"The reason that we are seeing this much strength in the dollar against the yen is purely because of the difference in two central banks' policies," noted Naeem Aslam, chief market analyst at AvaTrade.

"The Fed is as hawkish as it can be, and the BoJ still doesn't seem to be bothered much about inflation or changing its stance on monetary policy."

Japan's finance minister, Shunichi Suzuki, on Wednesday expressed concern about the yen's drop.

"For now, we're monitoring with a sense of urgency how it's developing, but if this continues, it makes sense that we will take necessary measures," he said, without detailing what the measures might be.