Oil prices dropped nearly 3% during Wednesday morning trades on worries about the ailing state of the global economy, the prospect of central bank interest rate hikes, and increased restrictions to curb COVID-19 in China.
Brent crude futures for November were down $2.70, or 2.76%, at $95.14 a barrel. U.S. West Texas Intermediate (WTI) crude futures were down $2.58, or 2.82%, at $89.06 a barrel by 0939 GMT, after sliding $5.37 in the previous session on recession fears, the Reuters news agency reports.
"The latest signs of stuttering growth are contracting Chinese factory activity in August and the slower-than-expected expansion of the country's service sector," Tamas Varga, analyst at PVM Oil Associates, said.
"Additionally, both the Fed and the ECB are thought to hike interest rates significantly next month, probably by as much as 0.75%," Varga said, adding that these put downward pressure on global oil prices.
There are also some factors supporting oil prices the falling gasoline and distillate stocks, which include diesel and jet fuel, in the US, and the talk of output cuts by members of the Organization of the Petroleum Exporting Countries (OPEC) and allies, together called OPEC+.
OPEC+ is due to hold meeting on September 5.The falling supply of natural gas through pipeline to Europe also lent further support to oil prices.
The Energy Information Administration of the US Department of Energy, in its August Short-Term Energy Outlook report, said Brent crude will average $104.78 per barrel and WTI will average $98.71 per barrel in 2022.