Oil Suffers Huge Weekly Loss As Demand Fears Mount

However, bullish economic news continues around the globe: File Image/Pixabay

Despite a modest price rise on Friday, oil suffered its steepest weekly loss since March due to a host of demand fears, the latest spurred by the announcement of Russia lifting its fuel export ban.

Brent posted a decline of about 11 percent and West Texas Intermediate an 8 percent drop; the former on Friday settled up 51 cents at $84.58 per barrel, and the latter settled up 48 cents to $82.79.

Ironically, Friday was replete with strong economic news, including the U.S. Labor Department reporting that job growth in that country rose by 336,000 in September compared to forecasts of only 170,000; also the Xinhua news agency disclosed that China's mid-autumn and National Day holiday travel rose 71.3 percent on the year and 4.1 percent compared with 2019, to 826 million trips.

Indeed, when considering this week's calamitous trading as skittish traders appeared increasingly convinced that economic bedlam was impending, Amarpreet Singh, analyst at Barclays, said , "The recent correction in oil prices has been too rapid and was largely unwarranted in our view.

"The narrative of price-driven demand destruction does not stand in the face of the fact that very little of the recent run-up in oil prices has been passed on to the consumers."

Both Barclays and Goldman Sachs Inc. argued that concerns of the earlier escalation of oil prices destroying product demand was overdone.

However, other analysts insisted that although a robust economy could herald strong near-term oil demand, it also increased chances of central banks increasing interest rates hikes yet again before the end of the year.

ING analysts said, "Today's [jobs] number keeps alive the prospect of another rate hike and certainly backs the Federal Reserve's argument on the need for interest rates to stay higher for longer."

As for Russia, the lifting of the ban on diesel exports for supplies delivered to ports by pipeline comes with a caveat: companies still must sell at least 50 percent of their production to the domestic market, in order to foster stability on the home front.

Russia also imposed high export duties on fuel resellers to discourage companies that don't produce the fuel themselves but buy it on the domestic market from exporting the fuels once the ban is lifted.

As for crude trading moving forward, Michael Kern, analyst at Oilprice.com, concluded, "With oil prices having crashed this week and demand concerns only mounting, it seems bullish traders will have to forget about triple-digit oil prices for now."