© Reuters. FILE PHOTO: An aerial view shows tugboats helping a crude oil tanker to berth at an oil terminal, off Waidiao Island in Zhoushan, Zhejiang province, China July 18, 2022. cnsphoto via REUTERS
By Laura Sanicola
NEW YORK (Reuters) – Oil prices settled more than 1% lower on Friday, falling for the fourth consecutive week, as the market balanced supply fears against renewed economic concerns in the United States and China.
futures settled down 81 cents, or 1.1%, to $74.17 while West Texas Intermediate (WTI) futures fell 83 cents, or 1.2%, to $70.04.
Both benchmarks settled about 1.5% lower week on week.
The U.S. dollar clung to modest gains against the euro on Friday and was headed for its biggest weekly gain since February, as uncertainty around the U.S. debt ceiling and monetary policy prompted a shift to safe havens. ()
A stronger greenback makes dollar-priced oil more expensive for holders of other currencies.
“Lack of confidence in the economy is translating to a retreat to the safer dollar, and is also causing pessimism about oil demand,” said John Kilduff, partner at Again Capital LLC in New York.
Concern mounted that the United States – the world’s biggest oil consumer – will enter recession, with talks over the U.S. government’s debt ceiling postponed and concern growing over another crisis-hit regional bank.
The U.S. Federal Reserve will probably need to raise interest rates further if inflation stays high, Fed Governor Michelle Bowman said on Friday, adding that data this month has not convinced her that price pressures are receding.
Meanwhile, China’s April consumer price data rose at a slower pace than in March, missing expectations, while deepening factory gate deflation refocused doubts about its recovery from COVID restrictions driving oil demand growth.
The U.S. oil and rig count fell this week to its lowest in nearly a year, as gas rigs slumped by the most in a week since February 2016, energy services firm Baker Hughes Co said in its closely followed report on Friday.
U.S. oil rigs fell by two to 586 this week, their lowest since June 2022, while gas rigs plunged by 16 to 141, their lowest April last year.
The market drew some support from the forecast emerging supply deficit for the second half of the year, even as Iraq’s oil minister Hayan Abdel-Ghani told Reuters on Friday he does not expect OPEC+ to decide on further production cuts when it next meets in Vienna on June 4.
An OPEC report on Thursday said the producer group expects July-December demand for its own crude to be 90,000 barrels per day (bpd) higher than previously projected.
The Organization of the Petroleum Exporting Countries (OPEC) kept its global oil demand forecast for 2023 unchanged on Thursday, expecting economic risks to be offset by higher Chinese demand growth.
The market also drew support after U.S. energy secretary Jennifer Granholm signalled that the country could repurchase oil for the Strategic Petroleum Reserve (SPR) after completing a congressionally mandated sale next month.
(This May 12 story has been corrected to say that oil prices fell for the fourth consecutive week, not third, in paragraph 1)
(Additional reporting Rowena Edwards in London, Yuka Obayashi in Tokyo and Andrew Hayley in Beijing; Editing by David Goodman, Kirsten Donovan, Nick Macfie and Daniel Wallis)
Oil prices experienced a significant decrease on Monday due to the appreciation of the US dollar and increasing worries about global fuel demand.
Brent crude, the international benchmark, fell by $1 to $56 a barrel at noon, while West Texas Intermediate, the US marker crude, declined 61 cents to $51.09 a barrel.
The upsurge of the dollar, which began in early June, weighed heavily on crude prices as it made oil costlier for holders of other currencies.
Adding to investors’ concerns, reports of rising coronavirus cases in some parts of the world put further pressure on oil prices, as resurgence of the virus might dent oil demand further in the near term. On Sunday, the United States reported more than 40,000 new coronavirus cases for the first time, and India crossed 500,000 confirmed coronavirus cases since the pandemic began, according to figures provided by Johns Hopkins University.
Still, investors remain optimistic about the long-term outlook for oil demand, given the numerous relaxation measures being announced, globally.
Moreover, the world’s top oil producers, members of the Organization of the Petroleum Exporting Countries (OPEC+) have been implementing a rigorous plan to reduce production in order to keep supplies balanced with demand.
However, with the short-term worries still in place, prices are likely going to remain volatile throughout the week.
In conclusion, investors should keep an eye on the dollar index, crude stocks and the number of new virus cases in the coming days, to better assess the potential direction of oil prices.