The oil price is on course for its biggest weekly fall for more than a year after crashing below $84 a barrel last night.
On another day of turmoil on financial markets, Brent crude fell as low as $83.84, taking its losses for the week so far to more than $11, or 12 per cent.
The last time it clocked up a bigger weekly fall was in August last year.
Oil was trading above $97 a barrel early last week, having risen by some 35 per cent since June and triggering warnings that it was heading back over $100.
The turnaround, including a $5 drop on Wednesday alone in what was the biggest daily decline for more than a year, will offer respite for motorists who have seen fuel prices soar in recent months.
Oil price: On another day of turmoil on financial markets, Brent crude fell as low as $83.84, taking its losses for the week so far to more than $11 or 12%
It will also be welcomed at the Bank of England and on Downing Street after both Andrew Bailey and Rishi Sunak vowed to bring inflation back under control.
‘Higher oil prices had been on the factors behind renewed angst over inflation,’ said Neil Wilson, chief market analyst at Markets.
Oil prices soared last year after the invasion of Ukraine by Russia, driving up inflation and piling pressure on businesses and households.
But having peaked at close to $130 a barrel in February 2022, the price was around $70 by June this year.
However, production cuts by Saudi Arabia, Russia and other members of the Opec+ cartel pushed the price higher amid hopes that the reopening of the Chinese economy following the lifting of lockdown restrictions would prop up demand.
But having reached $97 last week, worries that inflation would prove persistent fuelled fears that interest rates would remain higher than previously expected and for some time.
That has driven up borrowing costs – triggering fears about the outlook for the global economy and in turn demand for oil.
The 30-year UK bond yield hit a 25-year high this week while benchmark ten-year yields are at their highest level for more than a decade in Britain, the US, Germany, France and Italy.
That threatens to push up borrowing costs – and could tip economies into recession in the process.
Edward Moya, market analyst at trading firm Oanda, said: ‘This reversal must be frustrating the Saudis.
Brent crude has fallen over $10 since the end of last month as surging global bond yields have crippled the global growth outlook.’
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