Oil slumped on Friday as the market weighed in after central banks’ rate hikes, but it is poised for its biggest weekly gains in 10 weeks amid supply cut concerns and China’s hopes for demand recovery.
Brent crude futures were down 24 cents, or 0.3%, to $80.97 a barrel as of 0508 GMT. West Texas Intermediate (WTI) futures fell 29 cents, or 0.4%, to $75.82 a barrel.
Both indicators fell 2% in the previous session on the back of a strong dollar and rate increases from central banks in Europe.
Tight monetary policy is having an impact on industrial activity. The prospect of further tightening following the hawkish comments from policymakers weighed on sentiment.
The US Federal Reserve said it will raise interest rates further next year, even as the economy slides into a possible recession.
On Thursday, the Bank of England and the European Central Bank raised interest rates to fight inflation.
But oil is on track to post its biggest weekly gains since the beginning of October amid market sentiment fueled by potential supply tightness as the Keystone pipeline closes after a spill and demand are expected to rebound in 2023.
The International Energy Agency (IEA) forecasts that Chinese oil demand will recover next year after falling to 400,000 barrels per day (bpd) in 2022. The agency raised its oil demand growth forecast for 2023 to 1.7 million barrels per day.
OPEC on Tuesday tied to forecasts of global oil demand growth of 2.55m bpd this year and 2.25m bpd in 2023, saying there is a potential upside prospect as China’s zero-COVID policy relaxes, despite the economic slowdown being quite evident.
Investors are very cautious right now as the market is full of volatility.
Some analysts also expect the US to start replenishing its strategic oil reserves in the first quarter of 2023.
Downward pressures continue, including the slow recovery of demand in China due to the increasing number of COVID infections and an oversupply in the West Suez market.
