Oil Remains Range-Bound As Traders Fixate On Global Economic Slowdown

Meanwhile, Barclays lowers its forecast for Brent in 2022-23: File Image/Pixabay

With oil firmly in the trading doldrums, the commodity on Friday eked out a modest weekly gain but fear of a global economic slowdown continued to hound investors.

Brent settled up $1.12, or 1.2 percent, at $93.50 per barrel, while West Texas Intermediate settled up 54 cents, or 0.6 percent, at $85.05 per barrel.

Brent was up by 2 percent on the week, while WTI fell about 0.7 percent.

Oil has a lost a third of its value since early June due to slowdown concerns, and in addition to the aggressive monetary policy adopted by banks the worries also include Xi Jinping, president of China, stating that his nation would stick with its zero tolerance Covid infection policy, which continues to wreak economic havoc in that part of the world despite the virus's radically reduced impact on health.

And yet concurrently, the physical supply is tight and expected to become even tighter as the output cuts from the Organization of the Petroleum Exporting Countries (OPEC) take effect and the European Union enacts its much-ballyhooed sanctions against Russia.

Accordingly, Barclays on Friday cut its Brent forecast by $3 per barrel for 2022 and by $5 per barrel for 2023, stating that "oil demand could undershoot our estimates despite a potential easing of mobility restrictions due to a broader slowdown."

Barclays in August slashed its Brent oil price forecast to $103 per barrel for 2022 and 2023, down from $111 per barrel.

The bank added that if 2023 global oil demand is 1-2 million barrels per day (bpd) lower than expected, there is a downside of between $15 and $25 per barrel in its price forecast for next year.

In other news on Friday that may affect near term-trading, Germany stated that the European Union's goal to establish a cap on gas prices after several months of discussions "makes sense."

German Chancellor Olaf Scholz said implementation of the cap "always harbours the risk that the producers will then sell their gas elsewhere," but after negotiations with other European policymakers he agreed to go ahead with the measure - as long as it is implemented in a way that does not drive up consumption.

Markets welcomed the outcome of the EU negotiations: prices fell from about 127 euros per megawatt hour on Thursday to 110 euros per megawatt hour in afternoon trade on Friday.