Oil edges down as demand concerns weigh, heading for weekly fall(Update)


Brent crude futures LCOc1settled at $119.81, up $1.30, or 1.1%, while West Texas Intermediate (WTI) crude CLc1 futures ended up $2.27, or 2%, at $117.58. After the early selloff, buyers jumped back into the market as most forecasters expect supply to remain tight for several months. (File pic shows an Iranian oil complex. )

Oil prices edged slightly lower on Friday as worries about global economic growth and uncertainty weighed on markets following numerous interest rate hikes around the world this week.

Brent crude futures LCOc1 fell 83 cents, or 0.8%, to $118.98 a barrel, while U.S. West Texas Intermediate (WTI) crude CLc1 futures fell to $116.79 a barrel, down 80 cents, or 0.7%.

If losses hold through the day, Brent crude futures would post their first weekly dip in five weeks, while U.S. crude futures would see their first dip in eight weeks.

Central banks across Europe raised interest rates on Thursday, some by amounts that shocked markets, and hinted at even higher borrowing costs to come to tame soaring inflation that is eroding savings and squeezing corporate profits.

Argentina's central bank raised its benchmark interest rate by the most in three years on Thursday, as the South American country fights inflation running at over 60%

Those moves came on the heels of a 75 basis point rate hike this week by the U.S. Federal Reserve, the highest since 1994.

Federal Reserve policymakers are less confident than at any time since the height of the pandemic about what will happen with the economy, data showed.

U.S. stock indexes also closed sharply lower on Thursday in a broad sell-off as recession fears grew.

The International Energy Agency on Wednesday also warned that sky-high oil prices and weakening economic forecasts dimmed the future demand outlook.

Investors also remained focused on tight supplies after the United States announced new sanctions on Iran.

"A rebound in China demand sentiment, and expected seasonal ramp-up in OECD oil demand into August leaves price risk to the upside through 3Q 2022," said Baden Moore, head of commodities research at the National Australia Bank.

Oil price rebounds as new Iran sanctions fuel more supply concerns

Oil prices rose on Thursday in topsy-turvy trading after the United States announced new sanctions on Iran, and as energy markets stayed focused on supply concerns that have sent prices soaring this year.

The market slipped earlier as interest rate hikes in the United States, Britain and Switzerland fed worries about global economic growth.

Brent crude futures LCOc1settled at $119.81, up $1.30, or 1.1%, while West Texas Intermediate (WTI) crude CLc1 futures ended up $2.27, or 2%, at $117.58.

After the early selloff, buyers jumped back into the market as most forecasters expect supply to remain tight for several months.

"A lot of it is just a supply issue and that has to be worked through," said Eli Tesfaye, senior market strategist at RJO Futures. "Right now there isn’t a slowdown in global demand so any selloff is going to be seen as an opportunity and that’s really what we saw today."

The International Energy Agency said it expects demand to rise further in 2023, growing by more than 2% to a record 101.6 million barrels per day. Optimism that China's oil demand will rebound as it eases COVID-19 restrictions is also supporting prices. Read full story

Analysts said prices got a boost from Washington's decision to impose sanctions on Chinese, Emirati and Iranian firms that help export Iran's petrochemicals. Read full story

In addition, Libya's oil output has collapsed to 100,000-150,000 bpd, a fraction of the 1.2 million bpd seen last year, and analysts remain concerned that country could have ongoing problems delivering oil amid unrest. Read full story

Prices slipped more than 2% overnight after the U.S. Federal Reserve raised its key interest rate by 0.75%, the biggest hike since 1994.

"Once you raise rates that high also and you know it’s going to happen for next month, a lot of retail customers have tough time trading once you start increasing their costs of trading," said Robert Yawger, director of energy futures at Mizuho in New York.

On Thursday, European stocks tumbled after a surprise rate hike from Swiss National Bank. MKTS/GLOB This was followed by a rate hike by the Bank of England.- Reuters

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