Another Weekly Loss For Oil As Europe Said To Be Heading Toward Big Economic Slowdown

But Schlumberger predicts resilient global oil and gas activity growth in 2023:C File Image/Pixabay

The contention of some analysts that demand is waning and the bloom is off the crude trading rose was reinforced on Friday, when soft European economic data contributed to oil prices incurring a third weekly loss for the U.S. benchmark.

West Texas Intermediate settled $1.65, or 1.7 percent, lower at $94.70 per barrel, while Brent fell 66 cents, or 0.6 percent, to $103.20.

WTI's weekly drop was due to record high prices at the pump resulting in U.S. demand dropping nearly 8 percent from a year earlier in the midst of the peak summer driving season; Brent daily decline was in response to data on Friday showing the global economy looking increasingly likely to be heading into a significant slowdown.

However, signs of strong demand in Asia mitigated Brent's losses to a degree.

Trading optimism was not helped by Dennis Kissler, senior vice president of trading at BOK Financial, who offered his take on what impact a proposed cap on Russian oil – which is expected to be implemented later this year – will be.

He said, "Perceptions are growing that the U.S. and EU will implement price caps on Russian oil by year end, [and] past history shows that government-induced price caps on commodities are usually short lived and can result in exaggerated prices soon after."

But while the prevailing concern is that high prices are facilitating demand destruction, the fact remains that the physical market globally remains extremely tight, and on Friday came news that some relief is being provided by Saudi Arabia and Iraq diverting more of their crude to Europe and helping them pivot away from Russia.

More than 1 million barrels per day (bpd) of crude has made its way to Europe from the Middle East in the first three weeks of July via a pipeline that crosses Egypt, according to vessel-tracking data; in addition to those flows, about 1.2 million bpd have been shipped toward the canal from the Persian Gulf in the first three weeks of July, mostly from Iraq.

In other oil related news on Friday, the world's biggest oilfield contractor, Schlumberger, predicted  that sales will reach at least $27 billion this year as drillers ignore the recession threat and continue exploration; this is an 18 percent increase from 2021 and the biggest rise in 11 years.

Schlumberger CEO Olivier Le Peuch said in a statement, "We are witnessing a decoupling of upstream from near-term demand volatility, resulting in resilient global oil and gas activity growth in 2022 and beyond."