Oil futures were lower early Friday, on track for a weekly decline, as worries over a global economic downturn continued to plague the demand outlook.
Price action
- West Texas Intermediate crude for November delivery
CL.1,
-1.80%CL00,
-1.80%CLX22,
-1.80%
fell $1, or 1.1%, to $88.11 a barrel on the New York Mercantile Exchange, putting the U.S. benchmark on track for a 4.9% weekly fall. - December Brent crude
BRN00,
-1.60%BRNZ22,
-1.60%,
the global benchmark, was down 94 cents, or 1%, at $93.63 a barrel on ICE Futures Europe. It was off 4.4% for the week. - November gasoline
RBX22,
-2.81%
declined 1.9% to $2.652 a gallon, set for a 3% weekly pullback; November heating oil
HOX22,
-2.49%
was up 1.7% at $3.999 a gallon, leaving it down 0.5% for the week. - November natural gas
NGX22,
-1.56%
fell 1.4% to $6.46 per million British thermal units, off 1.5%.
Market drivers
Crude prices bounced on Thursday as markets whipsawed in the wake of a U.S. September consumer-price index reading that showed year-over-year core inflation, which strips out food and energy costs, accelerated to a 40-year high. The move cemented expectations for a supersize 75 basis point interest rate increase by the Federal Reserve early next month.
But U.S. stocks bounced back ferociously after tanking in the wake of the data, ending sharply higher. Crude and other assets perceived as risky were also lifted, while the dollar pulled back. Concerns remain, however, that aggressive rate increases by the Fed and other major central banks could spark a sharp global economic downturn.
Oil was set to give back a portion of last week’s rally that was attributed in large part to the decision by the Organization of the Petroleum Exporting Countries and its allies — a group known as OPEC+ — to cut production by 2 million barrels a day beginning in November. The actual reduction is expected to be around half that size since several producers were already pumping below their individual targets.
Downbeat assessments for demand growth by OPEC and the International Energy Agency in their monthly reports this week were contributing to the weaker tone, wrote analysts at Commerzbank, though they argued that downside for crude was likely to remain limited due to tight global supplies and OPEC+’s resolve to take action if necessary to put a floor under prices.
“The market is set to be just about balanced despite weaker demand in the first half of the year due to the OPEC+ production cuts that will come into effect from November,” the analysts wrote.
That’s due to be followed by a “pronounced undersupply” in the second half of the year,” they said.
“In our opinion, however, the most important argument in favor of high prices is the fact that OPEC+ has clearly signaled that it will do everything in its power to preclude any marked price fall: heavyweight Saudi Arabia appears to view its alliance with Russia as more important in this context than the goodwill of the U.S.,” the analysts wrote.
See: Saudi Arabia defends OPEC+ production cut, suggests White House wanted delay until after midterms
