Oil prices were little changed on Friday as the weak US dollar offset mixed US jobs reports, but both crude oil benchmarks closed the first week of the year low amid global recession concerns.
Brent futures fell 12 cents, or 0.2%, to $78.57 a barrel, while West Texas Intermediate (WTI) crude rose 10 cents, or 0.1%, to $73.77 a barrel.
During the week, both Brent and WTI fell over 8%, their biggest weekly dives while starting the year since 2016. Both benchmarks had increased by about 13% over the previous three weeks.
The upside potential for the oil market is limited in the near term. The economic outlook is rather murky.
U.S. service sector activity contracted for the first time in more than 2.5 years in November, according to a report from the Institute for Supply Management (ISM).
But another report showed the US economy posted solid job growth in December, pushing the unemployment rate back to its pre-pandemic low of 3.5% while the labor market remained tight.
Energy markets start 2023 with the biggest weekly drop in years
The U.S. jobs report pushed the U.S. dollar higher as investors commented that inflation is falling and the U.S. Federal Reserve (Fed) doesn’t need to be as aggressive as some feared.
A weaker dollar can boost demand for oil, as dollar-denominated commodities become cheaper for holders of other currencies.
The latest employment figures in the US are another sign that the economy is slowing gradually, and if this continues, the Fed is likely to raise rates by a quarter point at its next policy meeting.
Saudi Arabia, the world’s largest exporter of crude oil, has slashed the prices of Arab light crude oil it sells to Asia to the lowest level since November 2021 amid global pressures hitting oil.
Chinese stock markets, the world’s largest importer of crude oil, posted a five-day streak on Friday amid investors’ expectations that the Chinese economy will soon recover from the COVID woes and show a strong recovery in 2023.
But more countries around the world are requiring visitors from China to be tested for COVID, days before China lifts border controls as part of COVID-19 measures and initiates the eagerly anticipated return to travel for a population largely stranded at home for three years.
Eurozone inflation fell last month, but underlying price pressures are still mounting and economic growth indicators are surprisingly safe. It is thought that the European Central Bank will continue to increase interest rates in the coming months.
The Indian government expects economic growth to slow in the fiscal year ending March as we enter 2023 with subdued demand levels.
