Recession fears hit oil prices

24 January 2008

Oil prices fell sharply on Wednesday as fears that the US economy is heading for recession continued to grow.

The Federal Reserve implemented an emergency interest rate cut on Tuesday in a bid to stave off the anticipated economic slowdown but oil traders have indicated they do not believe it will work.

As a result, US crude for March delivery fell by $2.22 to close at $86.99 (£44.47) a barrel and the equivalent Brent crude contract lost $1.83 to settle at $86.62.

Those figures represent the lowest closes since late October, since when crude prices have climbed to record highs only to fall away because of concerns about the state of the US economy and the possibility of a significant drop in demand for oil products.

Addison Armstrong of Tradition Energy told Bloomberg there is now potential for oil prices to slide substantially in the next few days.

He added: "The overriding concern of the oil market is the slowdown of the US economy. The emergency rate cut yesterday appears to have raised concern about the economy, not eased fears."