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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 towards US$69 a barrel on Friday, but the US crude benchmark has still retreated by about 10 per cent 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.
Oil has slumped 14 per cent this year even after a decision by the Organisation of Petroleum Exporting Countries and its allies (OPEC+) to cut production from this month.
Crude has been battered by mounting concern that the United States 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 producer and OPEC+ leader Saudi Arabia lowered prices for exports to Asia.
The retreat has come despite signs of strength in the physical oil market, suggesting that the sell-off may be excessive. In that vein, Shell chief executive officer Wael Sawan said this week the market was actually “pretty tight”.
Mr Warren Patterson, head of commodities strategy for ING Groep, said: “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.”
In the Middle East, Iraq said it had 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 stand-off 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 stabilise in today’s session following its heavy sell-off,” said Mr Yeap Jun Rong, market strategist for IG Asia, although he added that caution remains. “There have been some signs of dip-buying at the US$70 level for Brent crude, so that may be a crucial level.”
