Oil Depreciates Amid US, Chinese Economic Worries

By Adedapo Adesanya

Oil depreciated on Friday, falling for the third consecutive week, as the market balanced supply fears against renewed economic concerns in the United States and China.

Brent crude futures lost 81 cents or 1.1 per cent to trade at $74.17 per barrel, while the US West Texas Intermediate (WTI) US crude futures fell by 83 cents or 1.2 per cent to $70.04 per barrel.

For the week, both crude oil benchmarks went down by more than 1 per cent.

The US Dollar was headed for its biggest weekly gain since February, as uncertainty around the US debt ceiling and monetary policy prompted a shift to safe havens.

A stronger greenback makes dollar-priced oil more expensive for holders of other currencies.

Concern mounted that the US – the world’s biggest oil consumer – will enter recession, with talks over the US government’s debt ceiling postponed.

A debt limit meeting between US President Joe Biden and top lawmakers that had been scheduled for Friday was postponed, sending jitters across markets.

The leaders have agreed to meet early next week.

The US federal government could run out of money to pay its bills as soon as June 1, the Treasury said, unless the debt ceiling is raised.

There are worries over another crisis-hit regional bank after Los Angeles-based lender, Pacwest Bancorp, said its deposits declined and that it had posted more collateral to the US Federal Reserve to boost its liquidity.

The US central bank will probably need to raise interest rates further if inflation stays high, Fed Governor Michelle Bowman said on Friday, adding that data this month has not convinced her that price pressures are receding.

Meanwhile, China’s April consumer price data rose at a slower pace than in March, missing expectations, while deepening factory-gate deflation refocused doubts about its recovery from COVID restrictions driving oil demand growth.

Meanwhile, Chinese oil demand is now expected to rise by 800,000 barrels per day, according to the Organisation of the Petroleum Exporting Countries (OPEC), up from the 760,000 barrels per day forecast last month, adding to a recovery after strict COVID-19 containment measures were scrapped.

This came as it expects world demand to remain steady at 2.33 million barrels per day in 2023.