Oil headed for a steep weekly decline as concerns over weakening global demand, further progress toward an Iranian nuclear deal, and the dollar’s surge to a record combined to drive prices lower.
(Bloomberg) — Oil headed for a steep weekly decline as concerns over weakening global demand, further progress toward an Iranian nuclear deal, and the dollar’s surge to a record combined to drive prices lower.
West Texas Intermediate, which rose toward $88 a barrel early in Asia, has slumped almost 6% this week as investors turned away from commodities. Tighter monetary policy and renewed anti-virus lockdowns in China have spurred concern that energy consumption will weaken. The dollar’s jump to an all-time high makes crude more expensive for overseas buyers.
Oil fell by more than a fifth in the three months through August, erasing all of the gains since Russia’s invasion of Ukraine. The retreat poses a challenge for the Organization of Petroleum Exporting Countries and its allies, with ministers due to meet on Monday to plan output policy. OPEC-watchers expect the group to keep supply steady as the outlook for oil markets may tighten.
“After the massive losses of the past three sessions, we may see some consolidation,” said Vandana Hari, founder of Vanda Insights in Singapore. “Our base case is a rollover by OPEC+ for October, but traders may be cautious not to short crude further until the outcome of Monday’s meeting is known.”
There has been a flurry of steps in recent weeks toward reviving Iran’s 2015 nuclear deal, which may unlock substantial crude flows if US sanctions are lifted as part of any agreement. In the latest development, Tehran sent its feedback to European Union mediators, with the aim of finalizing talks.
Widely-watched time spreads, one indicator of market tightness, have been volatile. Brent’s prompt spread — the difference between its nearest two contracts — was $1.23 a barrel in a backwardation, compared with almost $2 a barrel last Friday and 63 cents two weeks ago.
Oil’s slump has dragged gasoline lower, helping to cool inflationary pressures coursing through the global economy. Average retail pump prices in the US fell for 79 days to Wednesday, according to data from auto club AAA.
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