At $76, Oil set for 10% weekly drop over demand worries

At $76, Oil set for 10% weekly drop over demand worries

Oil prices were stable on Friday but both benchmarks were headed for a weekly loss on worries over weak economic outlooks in China, Europe and the United States weighing on oil demand.

Brent crude futures were at $76.16 a barrel, up 1 cent, at 0919 GMT. Brent hit a 2022 low this week.

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U.S. West Texas Intermediate crude inched up 7 cents to $71.53 a barrel.

The contracts are set for weekly losses of around 10% each, their worst weekly drops in percentage terms since August and April, respectively.

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The market structure for Brent contracts has switched to contango, meaning contracts for near-term delivery are cheaper than for delivery in six months, indicating that traders see weaker demand .

News of a leak closing Canadian firm TC Energy’s (TRP.TO) Keystone pipeline in the United States prompted a brief rally on Thursday. However, prices finally eased as the market took a view that the closure would be brief.

The market similarly shrugged off a queue of oil tankers being held up by Turkish authorities on their way to the Mediterranean from the Black Sea.

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In China, surging infections will likely depress economic growth in the next few months despite some restrictions being eased, bringing a rebound only later in 2023, economists said.

The U.S. economy is heading into a short and shallow recession over the coming year, according to economists polled by Reuters who unanimously expected the U.S. Federal Reserve to go for a smaller 50 basis point (bps) interest rate hike on Dec. 14.

The European Central Bank will also likely lift its deposit rate by 50 bps next week to 2.00%, another Reuters poll found, despite the euro zone economy almost certainly being in recession, as it battles inflation running at five times its target.

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