Oil suffers the largest quarterly percentage declines since the start of the Covid pandemic
And Fed interest rate hikes will make matters worse, analysts insist: File Image/Pixabay
On Friday, oil traders continued to assuage their fears of an erosion in demand as they caused another weekly drop in around two key benchmarks. 1 percentinfluenced in part by a strong increase in the WE dollar – which, however, does not take into account the drop in about West Texas Intermediate and Brent 20 percent in the third quarter, the largest quarterly percentage decline since the start of the Covid pandemic.
However, the benchmarks made modest daily gains on Friday after learning that Thursday night’s oil spill at Iraqit is Basra terminal has been contained and exports are gradually resuming – although continued disruptions are likely.
Brent climbed 70 cents at $91.54 per barrel at 17:43 GMT, while WTI gained 30 cents at $85.40 per barrel.
No one is really wrong in themselves
Neil Crosby, Principal Oil Analyst, OilX
John Kildufffounding partner of Once again the capitalsaid of the spill, “It definitely spooked the market because the initial report said these barrels were going to be off the market for a while.”
A sharp hike in US interest rates expected to curb inflation, but analysts fear it could lead to an outright recession and ruin fuel demand; the Federal Reserve could raise its benchmark interest rate by 75 basis points at its policy meeting next Tuesday.
This caused Stephen Brennockanalyst at PVMto state, “Recession fears coupled with higher interest rate expectations in the United States have created a potent bearish cocktail.”
Yet the dwindling expectations for a nuclear deal with Iran back up the claim that the physical market will remain tight and support prices, and that support could intensify in Q4 if the Organization of Petroleum Exporting Countries (OPEC) is carrying out its threat to cut production.
Meanwhile, the deep divide between analysts who think demand ruin is inevitable and those who lean toward fundamentals and think it will remain robust was widened on Friday by a view that suited both sides.
Norbert Ruckereconomics manager at Julius Baersaid: “We are still seeing demand growth, primarily in emerging markets, but we are also seeing stagnant demand in the western world and China.”
Neil CrobySenior Oil Analyst at OilXadded in reference to the difference between drastic and moderate downgrade predictions that have attracted media attention lately, “No one is deeply wrong per se, but inevitably, at some point, these two signals will have to converge and probably somewhere in the middle.”
As for the latest news on the continuing saga of upcoming sanctions against Russia to invade Ukraine and their potential effectiveness, kpler in a research note on Friday, said the former Soviet Union could find new markets for about half of the crude exports that will be banned by the European Union from December.
Specifically, Indonesia, Pakistan, Brazil, South AfricaSri lankaand some countries of Middle East could together buy as much as 1 million barrels per day crude this coming winter.