Oil prices extend losses but European gas highest…

Oil prices extend losses but European gas highest since March

A drop in oil prices has raised hopes that inflation could ease back from multi-decade highs. ©AFP

London (AFP) - Oil prices extended losses Tuesday but European gas prices hit near six-month highs, in both cases fuelling fears of recession.

Major stock markets mostly rose on bets that the Federal Reserve would not lift borrowing costs by 75 basis points for a third straight time next month after decades-high inflation eased in the United States.

However, "a slick of worry is growing about the darkening prospects for global growth as economies slow around the world, pushing down oil prices in expectation of lower demand", noted Susannah Streeter, senior investment and markets analyst Hargreaves Lansdown.

Both main crude contracts dropped, having lost about three percent Monday, as demand expectations decline in light of a string of soft economic indicators in major economies, notably China.

Signs that Iran is moving towards a nuclear deal added to the downward pressure on prices, with an agreement seen as allowing the country to restart oil sales into the world market.

Analysts said Tehran could provide 2.5 million barrels a day, giving a much-needed shot in the arm to supplies, which have been hammered by sanctions on Russia in response to its invasion of Ukraine.

Libya has also boosted production, helping prices drop to six-month lows and wiping out the gains seen after the Ukraine war started.

But analysts warned that there might still be some way to go on an Iran agreement, owing to upcoming US elections.

"A deal with Iran would likely not be popular with US voters and so is hard to envisage before the November mid-terms," said National Australia Bank's Ray Attrill.

"Markets are currently prone to optimism, though, and hopes for a deal...have added to downward pressure on oil prices."

The European Union on Tuesday it was studying Iran's response to a "final" draft agreement on reviving a 2015 nuclear accord with major powers it presented at talks in Vienna.

The United States on Monday said it was informing EU foreign policy chief Josep Borrell of its response to the text he submitted on August 8.

In Europe Tuesday, the natural gas reference price Dutch TTF rallied 4.7 percent to 230.50 euros per megawatt hour -- the highest points since the start of March, or not long after Russia's invasion of Ukraine.

Russian President Vladimir Putin on Tuesday accused Washington of drawing out the war, as explosions rocked a Russian military facility on the Kremlin-controlled peninsula of Crimea.

Washington is "using the people of Ukraine as cannon fodder", he said, lashing out at the United States for supplying weapons to Kyiv.