Oil prices rose on Friday but marked their most significant weekly losses since March as macroeconomic concerns weighed on demand. Another partial lifting of Russia’s fuel export ban added to these demand fears.
Brent futures settled at $84.58 per barrel on Friday, up 51 cents.
U.S. West Texas Intermediate (WTI) crude futures settled at $82.79, up 48 cents.
For the week, both Brent and WTI posted substantial declines, with Brent falling by approximately 11% and WTI dropping by over 8%. These losses were driven by concerns that persistently high interest rates would slow global economic growth and reduce fuel demand, despite supply constraints from Saudi Arabia and Russia, who pledged to maintain supply cuts until the end of the year.
The release of robust U.S. job growth data for September, which exceeded economists’ forecasts, had a mixed impact on oil prices. While a strong U.S. economy could support near-term oil demand, the data also resulted in a stronger U.S. dollar and increased expectations of another interest rate hike in 2023.
A stronger U.S. dollar typically has a negative effect on oil demand, as it makes the commodity relatively more expensive for holders of other currencies.
“Today’s (jobs) number keeps alive the prospect of another rate hike and certainly backs the Federal Reserve’s argument on the need for interest rates to stay higher for longer,” noted ING analysts.
Russia’s announcement of the partial lifting of its diesel export ban contributed to a decline in the price spread between gasoil and Brent futures. However, reports of increased Chinese travel activity provided some support to oil prices. During China’s mid-autumn and National Day holiday, travel activity rose significantly compared to the previous year and even exceeded 2019 levels.
In the U.S., the number of oil rigs declined by five to 497 this week, marking the lowest level since February 2022, according to energy services firm Baker Hughes.
Money managers reduced their net long U.S. crude futures and options positions in the week ending October 3 by 5,877 contracts, bringing the total to 279,759 contracts, according to the U.S. Commodity Futures Trading Commission (CFTC).