Oil Ekes Out Weekly Gain as Slowdown Fears Linger

(Bloomberg) 

Oil edged higher after a volatile week of trading as concerns over a global economic slowdown continued to dun the market.

West Texas Intermediate futures rose 0.6% to settle above $85, marking a weekly gain. Prices have been oscillating within a narrow band since late-September as investors

Oil has a lost a third of its value since early June due to slowdown concerns and aggressive measures by central banks to tame inflation, However, the market is facing a period of supply uncertainty in coming months as OPEC+ cuts output and the European Union implements sanctions on Russian flows.

“The bullish side of tighter supplies, especially diesel, against rising interest rates and a possible coming recession is keeping a nervous choppy trade in crude space,” said Dennis Kissler, senior vice president at Bok Financial Securities.

The impact of the looming sanctions on Russia, which will include petroleum products from early next year, is already filtering through the broader market. Croatia is working to wean its refinery off of Russian feedstock, while some Indian refiners have halted new spot purchases.

Brent remains steeply backwardated, a bullish structure where near-dated contracts are more expensive than later-dated ones. The prompt time spread was $2.17 a barrel in backwardation, compared with $1.48 a week earlier.

The outlook for Chinese demand also remains uncertain. President Xi Jinping signaled on Sunday that the nation would stick with its Covid Zero policy, but officials are said to be in debating whether to cut quarantine for inbound travelers. Recent oil buying by refiners has also been lackluster.