Oil prices were on course early on Friday to post a second consecutive weekly loss as concerns about the economy trumped larger-than-expected draw in U.S. commercial oil stocks.
Brent Crude prices fell this week below the $80 per barrel threshold as negative sentiment in the market prevailed due to concerns about a recession with rising interest rates in major developed economies.
The Fed, the European Central Bank (ECB), and the Bank of England are all expected to continue raising the key interest rates at their upcoming policy meetings. The Fed’s decision will be announced next week after the May 2-3 rate-setting meeting.
Early on Friday, WTI was trading a bit above $75 and Brent at around $79 a barrel.
Oil has now fallen back to the levels from before the surprise OPEC+ announcement of additional cuts in early April. The shock announcement sent prices rising for four consecutive weeks as short sellers ran for the exits and traders opened fresh long positions.
But last week and this week, fears of recessions returned and underwhelming U.S. consumer and GDP data further weighed on oil prices.
Data showed this week that U.S. consumer confidence declined in April, the third drop in consumer confidence in four months. In addition, U.S. economic growth slowed sharply to 1.1% in the first quarter from 2.6% growth in Q4, as companies curtailed investments amid rising interest rates and borrowing costs.
The large crude draw and a drop in gasoline inventories in the U.S., which the EIA reported on Wednesday, failed to offset the gloomy mood on the oil market.
“There was little in the way of fresh developments to justify the sell-off, but clearly sentiment in the market remains negative as a result of the macro outlook,” ING strategists Warren Patterson and Ewa Manthey said on Thursday.
“The prompt ICE Brent timepsread has also fallen back into a small contango, suggesting a more comfortable prompt market in terms of supply,” they added.
According to Saxo Bank’s strategists, “The technical break below $80 in Brent may attract additional short selling from momentum focused traders, with weak risk sentiment spreading from the banking sector.”
“WTI resistance at $76.50 and Brent at $80.50,” Saxo Bank said.
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By Tsvetana Paraskova for Oilprice.com
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