(Bloomberg) Oil headed for a third straight weekly decline, the longest losing run this year, as slowdown concerns and turmoil in the US banking sector prompted investors to flee from risk.
West Texas Intermediate edged higher toward $69 a barrel on Friday, but the US crude benchmark has still retreated by about 10% this week after a four-day skid. Trading was marked by a brief-but-dramatic plunge early on Thursday, when prices collapsed to touch the lowest intraday level since 2021.
Crude has been battered by mounting concern the US economy is on track to slide into a recession, potentially hurting energy consumption, just as investors track signs of continued instability among regional lenders. In addition, major exporter and OPEC leader Saudi Arabia lowered prices to Asia.
Oil has slumped 14% this year even after a decision by the Organization of Petroleum Exporting Countries and its allies to cut production from this month. The retreat has come despite signs of strength in the physical oil market, suggesting the selloff may be excessive. In that vein, Shell Plc Chief Executive Officer Wael Sawan said this week the market was actually “pretty tight.”
“While sentiment is negative at the moment, the market is in oversold territory and our balance sheet still shows that the market will be in deficit over the second half of the year, which should drive prices higher,” said Warren Patterson, head of commodities strategy for ING Groep NV.
Timespreads have narrowed off in recent sessions, signaling a less tight market. The prompt spread for global benchmark Brent — the gap between the two nearest contracts — was 15 cents a barrel in backwardation. The figure was 37 cents a barrel in backwardation a month ago.
In the Middle East, Iraq said it’s yet to strike a deal with Ankara that would allow for the resumption of almost half a million barrels a day of Iraqi oil exports via Turkey. The standoff between Baghdad and the Kurdistan Regional Government has halted shipments from the port of Ceyhan since late March.
“There are some attempts for oil prices to stabilize into today’s session following its heavy selloff,” said Yeap Jun Rong, market strategist for IG Asia Pte, although he added that caution remains. “There has been some signs of dip-buying at the $70 level for Brent crude, so that may be a crucial level.”