As softer U.S. economic statistics and an increase in petrol inventories stoked worries about a recession and slowing global oil demand, oil prices dropped on Friday, extending losses from the two prior days and aiming for a weeklong decline. At the morning June Brent futures were down 14 cents, or 0.2%, at $80.96 per barrel. The price of a barrel of June delivery West Texas Intermediate crude (WTI) dropped 12 cents, or 0.2%, to $77.25.
On Thursday, amid worries about a potential recession, both benchmarks fell more than 2% to their lowest level since late March, and they were expected to decline by around 6% this week. According to Hiroyuki Kikukawa, president of NS Trading, a division of Nissan Securities, “market sentiment remained bearish after the weak U.S. economic data, along with expectations of interest rate hikes, fueling worries over a recession that could dent oil demand.”
“WTI is expected to trade in the $75-$80 range for the next week as investors try to determine whether U.S. petrol demand will rise in the lead up to the summer driving season and whether China’s oil demand will really pick up in the second half of the year,” Kikukawa said. Weekly jobless claims increased last week according to economic statistics, raising fears about a slowdown in fuel demand as the delayed effect of the Federal Reserve’s periodic interest rate hikes begins to take affect and the U.S. labour market may be beginning to stall.
According to statistics released on Wednesday by the Energy Information Administration, U.S. crude oil inventories decreased more than expected last week due to increased refinery operations and exports, but petrol stockpiles unexpectedly increased due to weak demand.
