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Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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Oil About To Post First Full Weekly Loss In 3 Months

  • Oil posted its first five-day consecutive losing streak since April this week.
  • Early signs of demand destruction spooked the markets this week.
  • Crude prices have faced headwinds since the Fed decided to hike interest rates by 0.75 percentage points.

As fears of a global recession deepen, oil prices may end the week with the first five-day consecutive losses since April, Bloomberg has reported, also noting the Fed’s intention to tighten monetary policy sharply further.

Last week, the U.S. central bank announced the biggest rate hike since 1994, at 0.75 percentage points, as it tries to rein in inflation using all means available. The move sparked concern among lawmakers, and this week, the Fed’s chair gave testimony to the Senate banking committee.

In it, the official admitted that a recession, although not the desired outcome of monetary tightening, was “certainly a possibility”. Powell added that the success of this latest tightening push depended on external factors, citing the war in the Ukraine and Chinese Covid policies that have seen the country lock down several large cities and regions, which has affected supply chains.

As a result of this tightening, oil prices have been on the decline this week as the market prepares for the possibility of a recession in the world’s largest consumer. On Thursday alone, oil fell by more than 2 percent after Powell’s comments to the Senate, especially since the Fed’s char said his focus on reining in inflation was “unconditional”, Reuters reported.

There are also signs of possible demand destruction, with the WSJ reporting this week that U.S. drivers were curbing consumption by various measures, including carpooling, canceling trips, and working from home.

The latest economic data did not help, either. The flash June reading for the manufacturing purchasing managers index revealed a decline, reinforcing concern about a possible recession and weighing on prices.

Still, with supply remaining tight, volatility in oil remains higher than usual.

“Under these conditions, higher crude oil prices will become super sensitive to any perceived or otherwise increased supply inputs,” Stephen Innes, SPI Asset management managing partner, told Reuters this week.

By Irina Slav for Oilprice.com

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