Oil prices stables but remains on track for weekly decline
Oil prices were flat on Friday. However, on track for a weekly decline on fears of sharp interest rate increases expected to curb global economic growth and fuel demand.
Brent crude futures were flat 51 cents higher at $91.35 per barrel. U.S. West Texas Intermediate (WTI) crude futures closed the day at $85.11 per barrel for a gain of one cent.
Both benchmarks are directed for third consecutive weekly losses, hurt partly by a strong U.S. dollar, which makes oil more expensive for buyers using other currencies.
The dollar index stabled near last week’s high above 110.
In the third quarter till now, both Brent and WTI decline by 20 percent for the worst quarterly percentage declines since the start of the coronavirus pandemic in the first three months of 2020.
Investors are ready for a rise to U.S. interest rates, with the market also rattled by the International Energy Agency’s outlook for almost zero growth in oil demand in the fourth quarter owing to a weaker demand outlook in China.
“Both the IMF and World Bank warned that the global economy could tip into recession next year. This spells bad news for the demand side of the oil coin and comes a day after the IEA forecast (on) oil demand,” PVM analyst Stephen Brennock stated.
“Recession fears coupled with higher U.S. interest rate expectations made for a potent bearish cocktail.”
Other analysts insured that the sentiment suffered from comments by the U.S. Department of Energy that it was unlikely to seek to refill the Strategic Petroleum Reserve until after the 2023 financial year.
On the supply side, the market has got some support on dwindling expectations of a return of Iranian crude as Western officials play down prospects of reviving a nuclear accord with Tehran.
The possible OPEC+ production cuts could support the oil prices in the fourth quarter. This will be under discussion at the group’s October meeting, while Europe faces an energy crisis pass in front of uncertainty on oil and gas supply from Russia.
