Oil Pares Weekly Gain as Recession Fears Mount Across Markets

Oil has suffered a rocky end to the year as slack physical markets and limited disruption to supply from Russia weigh on prices. While the outlook has brightened in recent days as US inflation figures slowed and China looked set to reopen its economy, central banks struck a hawkish tone at key interest rate decisions this week.

“The prospect of further tightening put a downer on risk assets,” said Stephen Brennock, an analyst at PVM Oil Associates. “Warnings of more rate hikes across the board reignited fears about economic growth, which in turn weighed on the outlook for oil demand.”

Prices:

• WTI for January delivery fell 2.3% to $74.33 a barrel by 9:50 a.m. in London.
• Brent for February settlement dropped 2.1% to $79.50 a barrel.

China’s rapid dismantling of its Covid Zero policy has prompted optimism over the long-term outlook for demand, although the near-term forecast is uncertain as virus cases surge. Consumption may recover as early as the second quarter of next year, according to Vitol Group’s head of Asia, Mike Muller.

The biggest oil exchange-traded fund has also shown some signs of waning investor appetite over recent days. This week the US Oil Fund posted its largest daily outflow in more than two years.