Oil headed for a third weekly loss as a deteriorating global economic backdrop stoked demand concerns and a buoyant dollar made crude more expensive for most buyers.
West Texas Intermediate fell below $85 a barrel in Asian trading, taking losses this week to more than 2%. Consumption is being threatened by a hawkish Federal Reserve, the risk of a recession in Europe due to a severe energy crisis, and China’s struggles to revive its economy.
Among bearish signals on Thursday, the US Department of Energy dialed back expectations that a restocking of the nation’s strategic reserves was imminent. In Asia, China may allow more fuel exports, potentially reflecting weak domestic consumption in the top importer as growth slows.
Crude is on course for the first quarterly loss in more than two years, having reversed all the gains seen in the wake of Russia’s invasion of Ukraine. It has retreated alongside global equities and other commodities including copper as investors recalibrated their expectations for the economic outlook. In the US, a swathe of leading companies have flagged rising risks this week.
Oil has also come under pressure from a strong US dollar, with a Bloomberg gauge of the currency trading near a record this week on the outlook for tighter monetary policy. A rising greenback — which has helped push the yuan to its lowest since 2020 — makes commodities more expensive for buyers outside of the US.
With prices in retreat, several banks have cautioned on the outlook. Standard Chartered Plc said the global oil market has swung into a “large surplus” this quarter, while Morgan Stanley and UBS Group AG both cut their near-term forecasts amid mounting fears of recessions in major economies.
Widely-watched time spreads have been volatile. Brent’s prompt spread — the difference between its two nearest contracts — was $1.18 a barrel in backwardation, compared with $1.13 a week ago and more than $2 last month.
