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Oil prices head for fourth weekly drop as demand fears weigh
Global Banking & Finance Review®
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By Rowena Edwards
LONDON (Reuters) -Oil prices slipped on Friday, heading for a fourth weekly decline, as renewed economic concerns in the United States and China revived concern about fuel demand growth in the world’s two largest oil consumers.
Brent crude futures fell 43 cents, or 0.57%, to $74.55 a barrel by 0931 GMT. West Texas Intermediate (WTI) U.S. crude futures were down 33 cents, or 0.47%, to $70.54.
Both benchmarks are set to fall by more than 1% for the week, which would be the longest streak of weekly declines since November 2021.
With talks over the U.S. government’s debt ceiling postponed and renewed fears that another regional bank is in crisis, there is mounting concern that the U.S. will enter a recession.
Treasury Secretary Janet Yellen said on Friday that the U.S. faces financial and economic catastrophe if Congress fails to raise the debt ceiling.
And 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 so far this month has not convinced her that price pressures are receding.
Meanwhile, a decline in new loans to businesses in China and weaker economic data there earlier in the week refocused doubts about its recovery from COVID restrictions driving oil demand growth.
China’s April consumer price data rose at a slower pace and missed expectations, while factory gate deflation deepened, suggesting more stimulus may be needed.
The decline in oil prices was limited by a signal from U.S. energy secretary Jennifer Granholm that the country could repurchase oil for the Strategic Petroleum Reserve (SPR) after completing a congressionally mandated sale next month.
In addition, the Organization of the Petroleum Exporting Countries (OPEC) kept its global oil demand forecast for 2023 unchanged, as it expects economic risks to be offset by higher Chinese demand growth.
“The oil market is barrelling towards a supply deficit, assuming OPEC delivers on its latest production cuts,” said PVM oil market analyst Stephen Brennock.
(Reporting Rowena Edwards in London, additional reporting by Yuka Obayashi in Tokyo and Andrew Hayley in Beijing; editing by Jason Neely)
Brent crude is a major trading classification of crude oil originating from the North Sea. It serves as a benchmark for oil prices globally and is used to price two-thirds of the world's crude oil.
West Texas Intermediate (WTI) is a grade of crude oil used as a benchmark in oil pricing. It is sourced from the U.S. and is known for its light and sweet characteristics, making it desirable for refining.
The Organization of the Petroleum Exporting Countries (OPEC) is a group of oil-producing countries that coordinates and unifies petroleum policies among member countries to ensure the stabilization of oil markets.
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. It is typically measured by the Consumer Price Index (CPI) or the Producer Price Index (PPI).
A recession is a significant decline in economic activity across the economy that lasts for an extended period, typically visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.
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