Yahoo Finance Oil prices set for dismal week as recession fears mount
By Ambar Warrick
Investing.com-- Oil prices rose slightly on Friday, but were headed for steep weekly losses as fears of a U.S. recession, coupled with uncertainty over an economic recovery in China weighed on the near-term outlook for crude demand.
While prices took some relief from weakness in the dollar earlier this week, the trend was swiftly reversed on Thursday, as the greenback rebounded in anticipation of nonfarm payrolls data for January.
Markets feared that strength in the jobs market would keep inflation elevated for longer than expected, inviting more interest rate hikes by the Federal Reserve. The central bank noted that while inflation had retreated in recent months, it still needed to raise rates to pull down price pressures further.
High interest rates are set to weigh heavily on the U.S. economy this year, which has brewed concerns that crude demand could weaken amid a potential recession.
Brent oil futures rose 0.1% to $82.31 a barrel, while West Texas Intermediate crude futures rose 0.2% to $76.00 a barrel by 21:17 ET (02:17 GMT). Both contracts were set to lose between 4% and 5% this week- their second consecutive week in red.
Rising interest rates in the UK and the Eurozone also weighed on crude markets, with investors now positioning for a potential economic slowdown in the two regions. Both the Bank of England and the European Central Bank signaled this week that interest rates will rise further.
Markets also grew uncertain over a recovery in Chinese demand, as economic readings released this week showed some facets of the world’s largest oil importer were still struggling to recover after the lifting of anti-COVID measures.
A private survey showed on Friday that the country’s massive services sector rebounded past expectations in January. The reading was in part driven by a recovery in Chinese travel, which could herald an eventual rebound in fuel demand in the country.
But a Reuters report showed that the country’s fuel imports fell in January from the prior month.
On the supply front, U.S. oil inventories grew more than expected for a sixth straight week, pointing to a potential supply glut in the country. Such a trend is likely to limit any near-term gains in crude prices.
The Organization of Petroleum Exporting Countries and allies (OPEC+) kept its production levels unchanged during a recent meeting, offering little support for crude markets after a production cut in late-2022.
Russian fuel exports were also seen rising despite a recent price cap imposed by the West.
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