Oil Set for Large Weekly Decline as Concerns Over Demand Linger

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Oil headed for a large weekly loss as demand concerns continue to hang over the market.West Texas Intermediate pared an earlier gain to trade near $74 a barrel on Friday, and is down around 8% this week. Saudi Arabia reduced prices for crude sold to Asia and Europe in February, signaling concerns over the near-term outlook. China is battling a surge in virus cases after Covid-19 restrictions were lifted, although mobility is set to rise as the Lunar New Year holidays approach.

Oil Poised For Steep Losses in First Week of Year | US crude set for weekly decline as demand outlook sours

Crude’s weak start to the year has come as forward curves continue to signal signs of oversupply. The International Monetary Fund warned this week that a third of the global economy could enter a recession in 2023, while Federal Reserve Bank of St. Louis President James Bullard signaled that US interest rates weren’t yet sufficiently restrictive.

Investors are awaiting US non-farm payroll data due later Friday, which will provide clues on the path forward for monetary tightening.

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“The upside potential remains limited, at least in the near term. The economic outlook remains clouded,” said Stephen Brennock, an analyst at brokerage PVM. “In the meantime oil prices will take their cues from today’s US payroll report.”

Prices:

WTI for February delivery rose 0.3% to $73.92 a barrel at 8:44 a.m. in London.
Brent for March settlement added 0.3% to $78.95 a barrel.

US crude and refined product exports rose by 1.33 million barrels last week, according to government data. Commercial crude stockpiles climbed by 1.69 million barrels, while gasoline inventories fell.