Oil headed for a punishing weekly loss as signs mounted that a global economic slowdown is spurring demand destruction, with prices falling to their lowest levels in six months while spreads tighten at key times.
est Texas Intermediate was trading above $89 a barrel in Asia, with the US benchmark down more than 9 percent this week. Official data showed that US gasoline consumption has eased while crude stocks have risen. The slump came despite Saudi Arabia raising prices and OPEC+ warning of tight spare capacity.
As oil markets continue to remain in backwardation, a bullish price pattern, widely observed differences have narrowed sharply, suggesting an easing of the tightness. Brent’s prompt spread — the gap between the two closest contracts — was $1.62 a barrel backwardation, down from more than $6 a week ago.
After rallying for the first five months of the year, Crude Oil’s rally has been reversed, with losses deepening this month after falls in June and July. The sell-off, which erased gains sparked by Russia’s invasion of Ukraine, will ease the inflationary pressures that have been seeping through the global economy and have prompted central banks, including the Federal Reserve, to hike interest rates.
“The market is still grappling with a deteriorating demand situation in the US, with significant easing of pressure on refining capacity,” said Stephen Innes, Managing Partner at SPI Asset Management.
The move to much tighter monetary policy has fueled concerns among investors that growth could be slowing and jeopardize the outlook for energy consumption. The Bank of England warned the UK is heading into more than a year of recession as it increases borrowing costs, while in the US a procession of speakers from the Federal Reserve vowed to continue an aggressive fight to cool inflation.
China has also shown signs of weakness, clouding the outlook for the largest importer’s crude oil consumption. Recent data showed a drop in factory activity, while China Beige Book International warned the economy was deteriorating.
This week’s plunge was partly caused by Libya restarting production after a period of turmoil, potentially stabilizing the OPEC member’s exports at more than 1 million barrels a day and easing market tensions.
On Wednesday, the Organization of Petroleum Exporting Countries and its allies, including Russia, agreed a tiny increase in total supply for September but warned its spare capacity was extremely limited. Saudi Arabia, the group’s de facto leader, has hiked oil prices to a record high for buyers in Asia.
https://www.independent.ie/business/world/oil-suffers-deep-weekly-loss-as-concerns-over-demand-intensify-41891338.html Oil suffers heavy weekly losses as demand concerns mount