Oil headed for a third weekly drop, the longest run of declines this year, on concerns over weaker US gasoline demand and a global slowdown.
(Bloomberg) — Oil headed for a third weekly drop, the longest run of declines this year, on concerns over weaker US gasoline demand and a global slowdown.
West Texas Intermediate edged higher toward $97 a barrel, but the benchmark remains about 1% lower this week. US gasoline futures are on course for a fourth weekly loss after data showed rising stockpiles and stalling consumption, while average retail pump prices fell for 37 days to Wednesday.
While crude remains more than a quarter higher this year, the bulk of the gains triggered by Russia’s invasion of Ukraine have been reversed. Central banks including the Federal Reserve — which meets next week to set policy — have been raising interest rates to quell inflation, triggering concerns of a slowdown that’ll sap commodity demand. That’s hurt investor interest in oil even though the market’s pricing structure continues to point to signs of tightness.
“Both Brent crude and WTI futures curves remain in backwardation,” said Jeffrey Halley, a senior market analyst at Oanda Asia Pacific Pte, referring to near-term prices trading above longer-dated ones. That pattern “says that prompt physical supplies of oil in the real world look as tight as ever. For that reason, I do not see oil prices materially falling from here yet.”
The retracement in oil and gasoline prices will be welcome news for US President Joe Biden, who earlier this year ordered a massive release of crude from the nation’s Strategic Petroleum Reserve. Still, Biden’s efforts to get oil powerhouse Saudi Arabia to pump more have met with little success.
In a phone call on Thursday, Saudi Crown Prince Mohammed bin Salman and Russian President Vladimir Putin discussed continued cooperation within OPEC+, the broad group that comprises the Organization of Petroleum Exporting Countries and its allies. “It was emphasized that a further coordination within OPEC+ is important,” according to a statement from the Kremlin.
To ramp up the pressure against Russia, the US is aiming to get an agreement on a price cap for the country’s crude. The market hasn’t yet priced in the impact of European Union sanctions aimed at Russian supplies, which adds impetus to the price-cap plan, a US Treasury Department official said.
Traders also are monitoring the impact of disruption along the Keystone pipeline. TC Energy has reduced operating rates on a segment running from Canada’s oil sands to the hub at Cushing, Oklahoma, by about 15% following a power-supply glitch. Cushing is the delivery point for WTI futures.