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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.
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(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.
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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.
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“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.
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