Oil on course for its biggest weekly drop since March

6 Oct 2023 , 11:08 AM

Despite rebounding in early trade on Friday, oil prices were on course for their worst weekly loss since March due to mounting concerns that higher-for-longer interest rates will spark a global economic downturn and reduce fuel consumption.

Last week, both benchmarks climbed to 2023 highs, but this week, Brent has fallen 11.8% and WTI by around 8.8%.

While U.S. West Texas Intermediate crude futures were up 42 cents, or 0.5%, at $82.73, recovering marginally after a 2% fall on Thursday, Brent futures were up 36 cents, or 0.4%, at $84.43 on Friday.

A sharp sell-off that has driven Treasury prices to 17-year lows is being fueled by bond investors’ growing fears over government spending and the United States’ soaring budget deficit, which is the largest oil user in the world.

The Organization of the Petroleum Exporting Countries (OPEC+), along with its allies led by Russia, did not alter its policy regarding oil output at a meeting this week of a ministerial panel.

This week, U.S. government data revealed a dramatic fall in domestic gasoline demand, and economic data revealed a slowdown in the domestic services sector. According to a significant poll, the economy of the euro zone undoubtedly contracted last quarter as the high cost of the currency restricted global purchasing power.

On Friday, everyone will be watching the U.S. monthly jobs report for clues about the health of the country’s economy.

Oil prices will largely be influenced by tonight’s non-farm payroll figures, the US CPI, and China’s economic data the next week. A short-term encouraging sign for the demand forecast could be a strong economic front, according to Teng.

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