Oil is heading for a weekly loss as lingering concerns over an economic slowdown overshadowed signs of improving US demand.
West Texas Intermediate futures dropped to near $89 a barrel on Friday and are down almost 3% for the week after another period of choppy trading.
Although US gasoline demand is picking up after pump prices tumbled and OPEC’s new Secretary-General sounded a warning over “scarce” spare production capacity, concerns about weakening economic growth around the world continue to hang over the market.
“We have continued headwinds from the risk of an economic slowdown as central banks continue their efforts to bring down inflation by killing demand through higher rates,” Ole Hansen, Saxo Bank’s head of commodity strategy said. “With that in mind it looks as if macro has the upper hand over the micro at this stage.”
The market is digesting mixed policy signals from Federal Reserve officials on interest rates. St. Louis’s James Bullard urged another 75 basis-point move while Kansas City’s Esther George struck a more cautious tone, saying the pace of hikes is up for debate. The dollar has also strengthened this week, adding to headwinds for commodities.
Traders are also watching for any progress on the Iranian nuclear deal, which could lead to more crude flows from the OPEC producer.
- WTI for September delivery dipped 1.2 per cent to $89.43 a barrel at 10:13 a.m. in London.
- Futures gained 2.7 per cent on Thursday.
- Brent for October settlement slipped 1.2 per cent to $95.46 a barrel.
The gap between prompt Brent crude futures and the second month contract – a measure of the market’s reading of near-term supply and demand tightness – has narrowed significantly recently. The spread was 74 cents a barrel in backwardation, compared with $2.08 at the start the month.
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