By Ambar Warrick
Investing.com-- Oil prices inched up on Friday, but were headed for a third straight week of losses on fears that COVID disruptions in China and a potential economic recession will decimate crude demand this year.
The prevention of a possible U.S. railroad strike, which was expected to disrupt local crude supply, also dented prices this week.
London-traded Brent oil futures rose 0.2% to $91.06 a barrel, while U.S. West Texas Intermediate futures rose 0.2% to $85.25 a barrel by 22:45 ET (02:45 GMT). Both contracts tumbled around 4% on Thursday, and were set to lose nearly 2% for the week- their third week in red.
Positive Chinese industrial production and retail sales data did little to support prices on Friday, given that most other economic indicators show persistent weakness in the world’s largest crude importer.
Fears of a global recession were heightened this week after both the World Bank and the International Monetary Fund warned of a potential economic slowdown in late-2022 and 2023.
Data on Thursday also showed an unexpected contraction in U.S. industrial output in August, painting a dour picture for crude demand.
Oil prices have plummeted from highs hit this year on concerns that weakening economic growth will erode demand this year. A steady release of oil from the U.S. Strategic Petroleum Reserve has also diluted supply, particularly of WTI crude.
Markets are now positioning themselves for a steep interest rate hike by the U.S. Federal Reserve next week, with a bulk of participants seeing a 75 basis point raise. But hotter-than-expected U.S. inflation data released this week also saw investors begin pricing in the possibility of a 100 basis point hike.
While U.S. gasoline demand has recovered in recent months, markets fear that rising interest rates and a potential recession will weigh on the spending strength of consumers in the coming months.
Rising interest rates have also boosted the dollar, which weighs on crude prices by making oil purchases more expensive. Major Asian importers India and Indonesia have cut their imports this year on this notion.