Oil prices fell by more than $3 on Wednesday to their
lowest since January as a dollar surge and global demand concerns weigh on
prices despite the threat of disruption to Russian supplies.

Brent crude futures were down $3.40 or 3.66% at $89.43 per
barrel, hitting their lowest since February 3, and falling below $90 per barrel
for the first time since February 8.

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US West Texas Intermediate sank below $85. The benchmark
fell by $3.43 or 3.94% to $83.46, touching its lowest since January 24 as
recession fears moved back into the spotlight. The dollar index reached an
all-time high on Wednesday, offering a macro headwind at a time when the oil
market is grappling with potential slowing demand in China.

China’s crude oil imports in August declined 9.4% from a
year earlier, according to customs data on Wednesday.

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With central banks raising interest rates to curb
inflation, investors are concerned that economies may be tipped into recession.

Prices pared gains driven by a decision by the Organization
of Petroleum Exporting Countries and its allies on Monday to reduce output.
Reflecting the softness, Saudi Arabia lowered prices for customers in Asia and
Europe for next month’s shipments.

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According to Credit rating agency Fitch, the halting of the
Nord Stream 1 pipeline has raised the expectations of a recession in the
eurozone.

“The spectre of a demand-sapping recession across the
Western world is closer to becoming reality as soaring inflation and rising
interest rates dent consumption,” said PVM analyst Stephen Brennock.

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The European Central Bank (ECB) is widely expected to hike
interest rates sharply when it meets on Thursday. A US Federal Reserve meeting
is scheduled for September 21-22.

Britain’s new prime minister, Liz Truss, on Wednesday said
she wanted to see more extraction of oil and gas from the North Sea.

Earlier, the prices had been supported by a threat from
Russian President Vladimir Putin to suspend all oil and gas supplies if price
caps are imposed on Russia’s energy resources.

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The European Union (EU) proposed to cap Russian gas only
hours later, increasing the risk of rationing in some of the world’s richest
countries this winter.

The American Petroleum Institute will release its weekly US
inventory report on Wednesday.