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ENERGY

Oil prices drop amid recession fears and weaker demand outlook

Oil prices declined on Tuesday as growing fears of a potential economic recession in major economies raised concerns about weakening global oil demand.

The international benchmark Brent crude fell by 0.13%, reaching $75.94 per barrel at 12.08 p.m. local time (0908 GMT), down from $76.04 at the close of the previous session.

The US benchmark West Texas Intermediate (WTI) declined by 0.10%, dropping to $72.94 per barrel, compared to its prior session close of $73.02.

Oil prices fell as analysts noted that China’s economic activity, as the world’s largest oil importer, remains below expectations, with weak domestic demand persisting, raising concerns about potential risks that could affect the global economy.

The US dollar index, trading at its highest levels since November 2022, also contributes to declining oil prices. A stronger dollar makes oil more expensive for foreign currency users, dampening demand among market players.

Meanwhile, severe snowstorms across 13 states in the US have raised heating demand, easing the drop in oil prices, while expectations of increased energy production under President-elect Donald Trump have also supported the prices.

The National Oceanic and Atmospheric Administration warned of the most severe snowfall in a decade. At the same time, the PowerOutage platform reported that nearly 350,000 households experienced power outages due to fallen trees damaging power lines.

Concerns about the impact of the cold weather on oil production and refinery operations in the US are supporting prices upward.

On Monday, US President Joe Biden announced that he is moving to ban new offshore oil and gas drilling along most US coastlines.

‘I am taking action to protect the East and West coasts, the eastern Gulf of Mexico, and Alaska’s Northern Bering Sea from oil and natural gas drilling and the harm it can cause,’ Biden said in a statement.

The executive action will ban new oil and gas leasing across 625 million acres of US ocean.

Meanwhile, President-elect Donald Trump vowed to reverse the ban when he takes office on Jan. 20.

‘It’s ridiculous. I’ll unban it immediately. I will unban it. I have the right to unban it immediately,’ Trump said on the Hugh Hewitt Show.

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