Oil Logs Fourth Straight Week Of Losses As Economic Fears Persist

by Ship & Bunker News Team
Friday May 12, 2023

Oil prices on Friday ended the week largely as expected, with perpetually fearful traders clinging to their assumptions that world economies are in trouble and causing two key benchmarks to drop by over 1 percent.

The trigger for the losses was said to be the postponement of a debt limit meeting between U.S. president Joe Biden and top lawmakers that had been scheduled for Friday; although all principals agreed to meet early next week.

Aides from both sides are reportedly discussing ways to limit federal spending, with the overarching aim to raise the government's $31.4 trillion debt ceiling in order to avoid a default.

That, combined with modest gains for the U.S. dollar against the Euro on Friday caused Brent to settle down 81 cents, or 1.1 percent, to $74.17 per barrel, while West Texas Intermediate fell 83 cents, or 1.2 percent, to $70.04.

Oil prices have now incurred their fourth straight week of losses and crude has retreated by about 15 percent over the past month.

John Kilduff, founding partner at Again Capital, said, "Lack of confidence in the economy is translating to a retreat to the safer dollar, and is also causing pessimism about oil demand."

Adding to Friday's gloom was Michelle Bowman, governor at the U.S. Federal Reserve, who told media that her organization will probably need to raise interest rates further – after widespread talk that rate hikes were finished for the time being.

She said, "Should inflation remain high and the labor market remain tight, additional monetary policy tightening will likely be appropriate to attain a sufficiently restrictive stance of monetary policy to lower inflation over time."

Also on Friday, Citigroup reduced its forecast for Brent crude from $84 per barrel to average $82 per barrel this year, with demand continuing to fail to meet expectations.

Still, some analysts are perplexed by the bearish attitudes, and this was summarized by Alex Kimani, investor and researcher for Safehaven.com, who wrote, "A rather puzzling trend is being observed in the oil markets: there's a big disconnect between inventory data and oil prices."

Kimani went on to state with regards to energy stocks, "there simply aren't better places for people investing in the U.S. stock market to park their money if they are looking for serious earnings growth."