Brent crude dropped below $85 a barrel Monday, as recession fears weighed and the U.S. dollar surged.
Brent futures for November settlement decreased to around $84.53 early in the day, before recovering to trade around $85.85 by 10 a.m. London time. West Texas Intermediate futures also came off lows to trade around $80.
The U.S. dollar rocketed to a high not seen since 2002 Monday, while sterling tumbled to a record low against the currency.
On Friday, both Brent and WTI futures dipped around 5 percent to hit their lowest level since January.
Amrita Sen, co-founder and director of research at Energy Aspects, said that the drop in oil prices is a macro move led by a stronger dollar, which is triggering fears of a recession.
This came as central banks around the world, including the U.S. and the U.K., continue to rise interest rates in an effort to tackle inflation.
Investment bank Saxo’s strategy team stated market sentiment was continuing to deteriorate.
“The unrelenting pressure on commodities, including crude oil, continues following Friday’s gloomy session which saw accelerated dollar strength and growth pessimism cause a ripple through markets,” head of commodity strategy at Saxo Ole Hansen pointed.
“WTI trades below $80 per barrel while a return to the mid-80′s in Brent may soon see OPEC+ action to support prices,” he added.
As Russia warned it will not supply commodities to nations agreeing to cap prices for its crude and markets anticipate a recession, the energy sector could be the first to find support once the dollar stabilises, according to a statement of Hansen.
Fears around an economic slowdown continue to rise, with Steve Hanke, professor of applied economics at Johns Hopkins University, putting the chance that the U.S. will fall into recession at 80 percent.
“If the Fed continues the quantitative tightening and move that growth rate and M2 money supply into negative territory, it’ll be severe,” Hanke told CNBC’s “Street Signs Asia” on Friday.