Oil Down For The Day And Week As Traders Unable To Shrug Off Rate Hike Fears

Meanwhile, analysts continue to be gung ho about China's recovery in 2023: File Image/Pixabay

Oil prices on Friday maintained their gradual downward trajectory and contributed to a decline for the week, based on the familiar concerns of what U.S. rate hikes will do to the economy as well as earlier reports of growing inventories.

These fears were kindled in the previous session, when two Fed officials warning that additional hikes are essential to curb inflation caused the U.S. dollar to climb, thus making oil more expensive for holders of other currencies.

As for inventories, crude in the week to Feb. 10 rose by 16.3 million barrels to 471.4 million barrels, the highest level since June 2021 – even though analysts shrugged it off as a one-time supply adjustment.

Brent on Friday settled down $2.14 or 2.5 percent, to $83.00 per barrel, falling 3.9 percent week on week; West Texas Intermediate settled down $2.15, or 2.7 percent, to $76.34, falling 4.2 percent from last Friday's settlement.

Stephen Brennock, oil analyst at PVM, said, "Rate hike jitters have returned with a vengeance."

Goldman Sachs Group Inc. analysts led by Jeff Currie wrote in a note to clients, "The renewed range bound trade in oil is causing the market to become wary, demanding more cyclical evidence to invest in the structural bull case."

As usual, market analysts are sending conflicting signals about the oil market: on one hand, the Organization of the Petroleum Exporting Countries (OPEC) this week raised its forecast for global oil demand growth in 2023 due to expectations of a post-lockdown economic recovery in China.

On the other, J.P.Morgan analysts said in a note on Friday that Brent prices are unlikely to reach $100 per barrel level this year due to OPEC potentially adding supply and Russian flows recovering by mid-2023.

Still, the analysts agreed that China is expected to import a record amount of crude in 2023 due to increased demand for fuel.

Wood Mackenzie, FGE, Energy Aspects and S&P Global Commodity Insight have calculated  that China's crude imports may rise between 500,000 and 1 million barrels per day (bpd) this year to as high as 11.8 million bpd, reversing previous two years' decline to exceed 2020's record of 10.8 million bpd.