Oil is set for a weekly loss after a choppy trade that saw concerns about a slump in demand collided with signs of tight supply.
est Texas Intermediate was below $103 a barrel, which put the US benchmark on track for a weekly decline of more than 5 percent. Prices have ranged above $16 this week, taking both WTI and Brent briefly below $100.
Investors remain concerned that tightening US monetary policy could herald a recession and oil, along with other commodities, has been dragged lower. Two of the Federal Reserve’s most hawkish policymakers, Christopher Waller and James Bullard, backed a further 75 basis point hike in interest rates this month to stem scorching inflation while downplaying concerns about a slump.
Still, physical signals remain resilient, particularly in the US. In addition, there may be interruptions in delivery. A key Kazakh oil export route is at risk of being suspended as it appeals a Russian court order to temporarily close it.
Crude oil’s volatile trading means it is well below last month’s high but is still up more than 35 percent this year following Russia’s invasion of Ukraine. The complex market outlook has prompted banks to offer wildly different pricing scenarios, with Goldman Sachs Group Inc. remaining broadly optimistic, while Citigroup Inc. said the commodity is facing a significant dip.
In light of the recent “routine,” the financial oil market is moving dramatically from an extremely tight physical market,” analysts at RBC Capital Markets, including Helima Croft and Michael Tran, said in a note. “The physical market is pricing in scarcity, while the financial market is pricing in a recession.”
As a sign of tightness, oil markets remain in backwardation, a bullish pattern characterized by short-term prices outperforming longer-term ones. Brent’s prompt spread — the difference between the two closest contracts — was $3.69 a barrel in backwardation, up from $2.69 a barrel a month ago.
In China, meanwhile, investors are following Beijing’s efforts to shore up growth after anti-virus lockdowns hit the economy and energy consumption in the first half. The Treasury may allow local governments to sell 1.5 trillion yuan ($220 billion) in special bonds for infrastructure financing.
https://www.independent.ie/business/world/oil-heads-for-weekly-loss-as-growth-fears-trump-supply-tightness-41823973.html Oil heads for weekly losses as growth fears Trump supply shortages