Oil prices fell more than 3% on Friday as fears of a global recession and weak demand for oil, particularly in China, outweighed support from a massive cut to the OPEC+ supply target.
The OPEC+ supply cut appears to form the price foundations, however the negativities limit upward trend.
Brent crude futures fell $2.94, or 3.1%, to settle at $91.63 a barrel, while West Texas Intermediate (WTI) crude futures fell $3.50, or 3.9%, to $85.61.
Brent and WTI contracts swung between positive and negative territory for most of Friday, but fell 6.4% and 7.6%, respectively, for the week.
US core inflation posted its biggest annual increase in 40 years, bolstering the view that interest rates will remain higher for longer, amid the risk of a global recession. The next US interest rate decision will be made on November 1-2.
U.S. consumer confidence continued to improve steadily in October, but household inflation expectations deteriorated somewhat, according to a survey.
The improvement in consumer sentiment “is seen as negative because it means the Fed needs to demoralize consumers and slow the economy further, causing a surge in the dollar and downward pressure on the oil market.
The US dollar index rose around 0.8 percent. A stronger dollar reduces oil demand by making fuel more expensive for buyers using other currencies.
Energy services firm Baker Hughes Co said U.S. supply hit the highest level since March 2020, with energy firms adding eight oil rigs this week, bringing the total to 610.
China, the world’s largest importer of crude oil, is battling COVID-19 flare-ups after a week off. The country’s infection tally is low by global standards, but the a zero-COVID policy restrains flexibility. The policy is weighing heavily on economic activity and thus oil demand.
The International Energy Agency (IEA) on Thursday lowered its oil demand forecast for this and next year, warning of a potential global recession.
The market is trying to digest the decision last week by the Organization of the Petroleum Exporting Countries and its allies, known together as OPEC+, when they announced 2 million barrels per day (bpd) cuts in their oil production targets.
