Crude Oil Tests $95 as Recession Fears and a Surging Dollar Shake the Oil Rally's Foundation

On Wednesday, U.S. crude futures slid $4 to test the $95 per barrel support as recession concerns and a strengthening dollar in expectation of further rate hikes by the Federal Reserve shook the roots of this year's oil boom. After topping $97 a barrel in the previous session, the benchmark for U.S. crude oil, West Texas Intermediate, fell by more than $9.

Brent, the benchmark for international crude oil, dropped below $100 for the first time since April 25. Tuesday, Brent lost nearly $11 after a $101 examination.

Overnight, the Dollar Index, which measures the U.S. dollar to six major international currencies, surpassed 107 for the first time since December 2002. The dollar has climbed significantly since November of last year in anticipation of aggressive rate hikes by the Federal Reserve, which have just now begun to materialize.

In June, a carefully watched barometer of the U.S. services sector fell to its lowest level in twenty months, but despite rising labor and other input costs, it held up better than expected.

Separately, the U.S. Department of Labor said that the labor market may be slowing. According to its monthly study, the number of job openings declined in May to 11.254 million, which is still an all-time high. The sum was around a quarter of a million more than projected, and the government revised its estimate from May to 11,681 million.

The data on job openings was issued before the more critical nonfarm payrolls report on Friday, which is anticipated to suggest a slower rate of employment growth in June compared to May. Economists anticipate that around 268,000 payrolls were added in June, compared to 390,000 in May, keeping the unemployment rate at 3.6% for the third straight month. The Federal Reserve considers a rate of unemployment of 4 percent or less to signify full employment.

In an assessment of the energy sector, Goldman Sachs analysts wrote, "While we believe that higher consumer prices are required to stabilize the oil market this summer, we recognize that significant and huge shocks continue to distort fundamentals."