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NEWS

Oil prices rose about 2% in volatile trade on Friday but were still heading for a weekly decline as investors worried about a potential recession-driven demand downturn even as global fuel supplies remained tight.

Central banks around the world are raising interest rates to tame inflation, spurring fears that rising borrowing costs could stifle growth, while mass COVID-19 testing in Shanghai this week caused worries about potential lockdowns that could also hit oil demand.

Brent crude futures rose $2.37, or 2.3%, to settle at $107.02 a barrel. U.S. West Texas Intermediate crude rose $2.06, or 2%, to settle at $104.79 a barrel. Both benchmarks traded in negative territory and then rebounded from session lows. Brent posted a weekly decline of about 4.1% and WTI a loss of 3.4%, following on from the first monthly decline since November. Prices tumbled on Tuesday, when Brent’s $10.73 drop was the contract’s third-biggest daily fall since it started trading in 1988.

U.S. non-farm payrolls data showed the economy added more jobs than expected in June, a sign of persistent labor market strength that gives the Federal Reserve ammunition to deliver another 75-basis-point rate hike this month.

“The oil market is looking at the jobs report as a double-edged sword,” said Phil Flynn, analyst at Price Futures Group. “The jobs number was positive from a demand perspective. On the bearish side, the market is concerned that if the jobs market is strong, the Fed can be more aggressive with raising rates.”

U.S. energy firms this week added two oil rigs, bringing the total to 597, highest since March 2020, energy services firm Baker Hughes Co said.

Oil prices soared during the first half of 2022. Brent neared the record high of $147 after Russia launched its invasion of Ukraine in February, adding to supply concerns.

“Economic worries may have roiled oil prices this week, but the market is still flashing bullish signals. This is because supply tightness is more likely to intensify from this point than to ease,” said Stephen Brennock of oil broker PVM.

Western bans on Russian oil exports have supported prices and sparked a re-routing of flows while the Organization of the Petroleum Exporting Countries (OPEC) and allied producers struggle to deliver on pledged production increases. Russian President Vladimir Putin warned the West that continued sanctions against Moscow risked triggering “catastrophic” energy price rises for consumers around the world

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NEWS

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NEWS

Oil marked its first monthly decline since November as OPEC+ completed the return of output it halted during the pandemic and signs emerged that the US economy was on weaker footing than expected.

West Texas Intermediate dropped below $106 a barrel on Thursday, posting a monthly decline of 7.8%. OPEC+ rubber-stamped an increase in supply for August, but focus is turning to how much those members with spare production capacity will pump once the current agreement ends. President Joe Biden said he’ll request more output at the Gulf Cooperation Council forum next month rather than ask Saudi Arabia directly. Prices were also pressured Thursday after a report showed US consumer spending fell in May for the first time this year and prior months were revised lower. “A raft of US data all drove home the point that recession risks continue to grow” said Ed Moya, senior market analyst at Oanda. “The demand outlook might be deteriorating as gasoline usage has disappointed” with retail prices hovering near record highs.

US gasoline demand is showing signs of softening just three weeks into the peak driving season. This comes after retail gasoline prices hit national record highs earlier in the month. The data were published a day after a report showed fewer Americans are planning road trips this summer as gas prices soar. Demand has stalled since the beginning of the year, when we were having a higher rate of demand growth, Ed Morse, Citigroup’s global head of commodity research, said in a Bloomberg TV interview. “And it’s stalling out in the rest of the world because of high prices.”

Soaring gasoline prices have become a political problem for Biden, who has lobbied OPEC+ to increase output while also tapping into the strategic reserve to supplement the tight physical market. In his upcoming visit to Saudi Arabia, Biden said, he will ask American allies in the Persian Gulf region to increase production instead of asking Crown Prince Mohammed Bin Salman directly to boost energy output directly at the July 16 meeting. Even as futures have come off in recent days leading to the first monthly decline this year, premiums for more promptly available physical barrels are fetching enormous premiums amid outages from Libry to Ecuador.

Oil is still about 45% higher this year as the global economic recovery coincided with upended trade flows from Russia after its invasion of Ukraine in late February. US crude inventories at the key storage hub at Cushing, Oklahoma, have reached critically low levels as refineries produce as much fuel as possible, while the pull for barrels from overseas remains strong. The world is heading for a “turbulent period” as tightening supplies of oil and liquefied natural gas exacerbate a global energy crunch, Shell Plc Chief Executive Officer Ben van Beurden said in Singapore on Wednesday. “Spare capacity is very low, demand is still recovering,” he said.

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