The demand for oil looks grim as the dollar becomes weaker
On Friday, oil prices increased as the dollar fell. However, they were still on track for significant weekly losses due to expectations that the U.S. will continue to raise interest rates sharply, as well as the possibility of weaker demand from China, the world’s largest oil importer, as a result of the rise in COVID-19 cases.
Despite recovering 67 cents, or 0.8%, to $90.45 a barrel at 0130 GMT, Brent crude futures were still close to the four-week low of $89.53 earlier in the day.
Despite increasing by 70 cents, or 0.9%, to $82.34 per barrel, U.S. West Texas Intermediate (WTI) oil futures maintained close to a six-week low.
Oil prices rose on Friday due to a modest fall in the dollar value, making the commodity more affordable for customers using foreign currencies.
However, this week, WTI has lost more than 7% of its value, while Brent has lost around 6%.
Analysts claimed that worry about probable Chinese lockdowns to stop a rise in COVID cases, which reached their highest level since April, and concerns that further interest rate hikes will send the U.S. economy into recession had clouded the market.
According to a statement to clients from Stephen Innes, managing partner at SPI Asset Management, “oil prices remain under pressure, with demand crimped by growing China COVID-19 cases and fears of further aggressive hikes in U.S. interest rates.”
This week, U.S. Federal Reserve officials’ comments crushed hopes for any moderation of the country’s rapid interest rate increases.
According to the National Health Commission, China recorded 25,353 new COVID-19 infections on November 17, up from 23,276 new cases the previous day.
According to Commonwealth Bank commodities analyst Vivek Dhar, “the policy choices in the city of Guangzhou in southern China, where COVID-19 instances have grown dramatically, will be vital to observe.”
Even though the European Union’s ban on Russian crude is set to take effect on December 5 and the Organization of the Oil Producing Countries and Allies, collectively known as OPEC+, is reducing production, recession worries have taken center stage this week.