Oil headed for its first weekly loss since June as concerns over economic weakness in China and potentially even tighter monetary policy in the US combined to overshadow signs of a solid physical market.
(Bloomberg) — Oil headed for its first weekly loss since June as concerns over economic weakness in China and potentially even tighter monetary policy in the US combined to overshadow signs of a solid physical market.
West Texas Intermediate traded near $80 a barrel, set for a drop of about 4% this week as a stream of poor economic data and a widening housing crisis in China has weighed on risk assets including oil. That has eclipsed signs of a tighter crude market, with US stockpiles declining to the lowest level since January.
In the US, Federal Reserve policymakers have signaled they may not be done hiking rates to tame inflation, helping to lift Treasury yields and aiding the dollar. The US currency is on course for a fifth weekly gain, the longest run in more than a year, which dulls the allure of commodities for overseas buyers.
Crude remains markedly higher from its lows in June, driven largely by supply cuts by OPEC+ linchpins Saudi Arabia and Russia. That’s led many observers, including the International Energy Agency, to forecast tighter balances and higher prices before the year is out. Nevertheless, Citigroup Inc. has countered that oil will weaken as consumption disappoints and supply swells.
“We expect that Brent will not break out of the yearly range,” Rabobank anlayst Joe DeLaura said in a report, noting that Brent struggled to break through its 2023 highs in recent days. “We see the current macro overhang and worsening Chinese economic data to keep this ceiling intact.”
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