(Bloomberg) -- Oil dipped for a second session, trimming a weekly gain, as investors weighed concerns over a global economic slowdown against a bullish outlook for Chinese demand following the end of Covid Zero.
West Texas Intermediate futures dropped below $78 a barrel in Asia on Friday, but are still up almost 6% for the week. Federal Reserve officials this week signaled further tightening of monetary policy to combat inflation, with recession risks across the global economy hanging over the market.
The market is still waiting for a sustained rebound in Chinese demand following the nation’s dismantling of Covid restrictions, which some predict will drive Brent crude back above $100 a barrel later this year. However, options traders are betting that price rally may come as soon as late May.
“The market is seeing a recovery in demand, with mobility in China, the US and Europe all showing improvement,” said Gui Chenxi, an analyst at CITIC Futures Co. Oil will climb further if recession concerns ease, she added.
Oil is on track for the biggest weekly advance since mid-January after a three-day rally at the start of the week. Saudi Arabia’s increase in its crude prices for Asia — signaling confidence in the demand outlook — and a series of supply outages from Norway to Turkey underpinned the gains.
The disruptions to supply have led to Brent firming in a bullish backwardation structure. The prompt spread — the gap between its two nearest contracts — was 43 cents a barrel in backwardation, compared with 23 cents a week ago.
