Oil Falls Amid Worries That the Global Economy Is Weakening

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The drop in oil came in tandem with a selloff in the stock market on Monday.

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Robyn Beck/AFP via Getty Images

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Oil prices extended declines on Tuesday as concerns grew that the global economy could be heading into a downturn, crimping demand for energy.

Brent crude, the international standard, fell 0.4% to $105.42 after declining more than 5% on Monday. West Texas Intermediate, the US benchmark, slipped 0.4%.

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The drop in prices came in tandem with a selloff in the stock market on Monday. Tighter lockdowns in China, the world’s second-biggest economy, the prospect of more Federal Reserve interest-rate increases, and the stronger dollar combined to damp sentiment among investors.

Export growth in China slowed to the weakest in two years as the company restricted movement and activity to stop the latest Covid-19 outbreak from getting worse.

The Fed, which is raising borrowing costs to tame the fastest inflation in four decades, warned Monday in its financial stability report that higher rates also pose risks to the economic outlook.

The dollar index, which measures the currency’s strength against a basket of others, is up 14% over the past year and recently reached its highest level since 2002. That could damp international trade as other countries have to pay more to work in dollar-based contracts.

Another driver behind the drop in oil prices is wrangling within the European Union over a ban on importing crude from Russia. The war in Ukraine has raised concerns about supply for the bloc, and some Eastern European countries such as Hungary have tried to weaken the measures.

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Credit: www.marketwatch.com /

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