WTI falls by 6pc as investors flee to cash

WTI crude futures slumped by as much as 6pc in early trading today as investors worldwide take shelter in safe haven US dollar on heightened fears of recession.

November Nymex WTI shed $4.97/bl to trade at $78.52/bl by mid-morning as part of a broad selloff in markets including commodities, equities, and foreign currencies.

The light sweet crude benchmark at Cushing, Oklahoma, has not settled below the $80/bl mark since 10 January.

The US DXY dollar index, which tracks the dollars versus a basket of trading partner currencies, was at its highest in more than 20 years, as investors seek the relative safety of the dollar amid the global jitters. That is making dollar-denominated commodities such as oil pricier for holders of foreign currency.

The British pound fell to its lowest against the dollar since 1985 while the Japanese yen and the Chinese yuan have also weakened sharply.

The global selloff includes major stock exchanges with US Dow Jones Industrial and the German DAX both down at lows not seen in almost two years and the UK's FTS-100 down by more than 2pc today. The S&P 500 is down by about 1.75pc and the energy and commodities-heavy Toronto Stock Exchange is down by more than 2.5pc.

Base metal prices on the London Metal Exchange (LME) also fell heavily.

The jitters have intensified after a slew of central banks, led by the US Federal Reserve, this week hiked interest rates and warned that inflation was likely to remain stubbornly high. Many, like the Fed, lowered their growth outlooks. The Fed expects the US economy to grow just 0.2pc in the fourth quarter from a year earlier, down from a forecast of 1.7pc in June. Fed board members and bank presidents see unemployment reaching 4.4pc in a year, from 3.7pc in August.

The Fed on Wednesday raised its target rate by 75 basis points, its third consecutive increase of that magnitude in four months, warning it would do what it takes, including risking higher unemployment and a recession, to bring down inflation.

The gloomy macroeconomic outlooks have overshadowed the prospect of further escalation of the war in Ukraine, which upset global crude flows and has contributed to rising prices this year.

President Vladimir Putin this week announced a partial mobilization and issued a barely-veiled threat to use nuclear weapons. This prompted US President Joe Biden to call on the UN to hold Putin accountable for war crimes.

By Brett Holmes