Oil prices held near eight-month lows on Monday after falling sharply last week, as markets feared that slowing global economic activity will dent demand for crude.
London-traded Brent oil futures rose 0.3% to $85.29 a barrel, while U.S. West Texas Intermediate futures were unchanged at $78.67 a barrel by 21:30 ET (01:30 GMT). Both contracts were trading just above their weakest level in eight months and were nursing steep losses from last week.
Prices trimmed early gains on Monday after Japanese business activity data showed manufacturing activity in the world’s second-largest economy grew at a slower pace in September from the prior month.
The reading came on the heels of dismal business activity data from the Eurozone and the UK last week, which heightened fears of a global recession.
Oil prices plummeted last week after the weak economic readings. Hawkish signals from the U.S. Federal Reserve also cemented expectations for higher interest rates this year.
Traders fear that a mix of high inflation and rising interest rates will cause a slowdown in economic activity, denting demand for oil. Crude prices have plummeted from highs hit during the onset of the Russia-Ukraine war on that notion.
Strength in the dollar, which was trading at 20-year highs, also weighed on oil prices. A stronger greenback tends to make crude imports more expensive, weighing on demand. Major Asian importers India and Indonesia face headwinds from a stronger dollar.
An economic slowdown in China, the world’s largest crude importer, has also weighed heavily on demand this year.
Threats of production cuts by the Organization of Petroleum Exporting Countries last week did little to deter declines in crude. News of a potential escalation in the Russia-Ukraine conflict, which is likely to disrupt global crude supply, also caused only a short-lived bounce in prices.
But traders still expect crude demand to improve in the fourth quarter, particularly in the event of a harsh European winter, which could push up demand for heating oil.
U.S. gasoline demand is also expected to improve as fuel prices ease further from record highs in the country.