ISLAMABAD
Oil futures lowered for the fourth week in a row over concerns about a slowing global economy and energy demand, dragging the prices to the lowest since November.
Both major global benchmarks Brent and WTI shaved off 1.5 percent and 1.82 percent respectively on a week-on-week basis. Brent, the international benchmark for two-thirds of the world’s oil, came down to $74.17 from $75.30 on a week-on-week (WoW) basis. The West Texas Intermediate (WTI), the main oil benchmark for North America, went down to $70.04 from $71.34 on a weekly basis.
During the last four weeks, Brent has been down by 14 percent while WTI has dropped by 15 percent. Overall during this year so far, Brent is down by 13.7 percent while WTI has fallen by 12.7 percent.
The price of Russian Sokol decreased by $4.41 (-6.34 percent) to $65.20 from $69.61 on WoW basis. Similarly, Arab Light prices witnessed a decrease of $4.97 (-6.15 percent) to reach $75.87 from $80.84 a barrel on a weekly basis.
However, the price for Opec Basket surged from $73.75 to $76.69 on a week-on-week basis, showing an increase of $2.94 (+7.85 percent). The OPEC Reference Basket of Crudes (ORB) is made up of Saharan Blend, Girassol, Djeno, Zafiro, Rabi Light, Iran Heavy, Basra Light, Kuwait Export, Es Sider, Bonny Light, Arab Light, Murban and Merey.
The selloff in the market has been unrelenting over recent weeks, with negative sentiment rising following concerns over the macro environment. Concern mounted that the world’s biggest oil consumer, the United States will enter recession, with talks over the US government’s debt ceiling postponed and concern growing over another crisis-hit regional bank. Ongoing troubles for US regional banks and a political showdown over the Biden administration’s debt ceiling amplified worries that aggressive monetary tightening by the Federal Reserve and other major central banks could lead to a sharp economic downturn or recession later this year.
Meanwhile, China’s April consumer price data rose at a slower pace than in March, missing expectations, while deepening factory gate deflation refocused doubts about its recovery from Covid restrictions driving oil demand growth. Asian economic growth has also been a key concern due to rise in inflation in China.
Crude has stumbled even as additional production cuts of around 1.15 million barrels a day by Saudi Arabia and its OPEC+ allies took effect at the beginning of the month. Meanwhile, news reports have noted doubts that Russia is following through on its pledge to curb output by 500,000 barrels a day through year-end.
The total number of total active drilling rigs in the United States fell by 17 last week, after falling by 7 last week. It has been the largest single-week drop in the number of oil and gas rigs in the United States since June 2020. On the other hand, the US dollar clung to modest gains against other major currencies last week, as uncertainty around the US debt ceiling and monetary policy prompted a shift to safe havens. A stronger greenback made dollar-priced oil more expensive for holders of other currencies.
Heading into the new week, a lot rests on sentiment and in particular how the US addresses ongoing concerns around regional banks and recession fears.
