Oil prices crashed further on Tuesday as concerns about a global economic slowdown and growing COVID-19 cases in China reduced risk appetite among traders.

West Texas Intermediate lost as much as eight per cent to slip under $96 a barrel.

Reports show that rising virus cases in China and looming United States inflation data were stoking concerns about demand.

Meanwhile, dwindling liquidity was also exacerbating price moves while money managers turned more bearish on the main oil benchmarks last week, cutting their net-long positions to the lowest since 2020.

“The volatility in commodity markets increases the stakes for putting money to work,” said Rebecca Babin, senior energy trader at CIBC Private Wealth Management.

“The decimation of other commodities has also reduced risk appetite for crude even in supply constrained market,” she added.

Despite recession fears, several energy administrations agreed that supply tightness is set to worsen.

IEA’s Executive Director, Fatih Birol, said nations “might not have seen the worst” of a global energy crunch while OPEC’s first look at 2023 showed no relief from oil market tightness. Later on Tuesday, the EIA will release its Short-Term Energy Outlook.

Crude has fallen since early June on escalating fears the United States may be heading for a recession as central banks hike rates aggressively to combat inflation.

Yet physical markets continue to show signs of strength. Premiums for North Sea oil were bid at the highest since at least 2008.

The oil futures curve also remains backwinded, where near-term contracts are more expensive than those for later delivery.

President Joe Biden is scheduled to visit Saudi Arabia this week during a tour to the Middle East as he seeks to tame high energy prices that have roiled the global economy.

The US believes OPEC has room to raise production should Biden’s upcoming visit to the region yield any agreement. France’s President, Emmanuel Macron, will meet with the leader of the UAE next week to discuss oil supplies.