Crude falls to three-month low amid volatile trading week

Crude prices fell to a three-month low in a volatile week of trading, buffeted by traders increasingly worried about an economic downturn.

West Texas Intermediate fell three of five trading days on the New York Mercantile Exchange, led by a $8.25 plunge on Tuesday that sent prices below $100 a barrel for the first time since early April. Prices remained under $100 the rest of the week, managing to add $1.81 Friday to close at $97.59 per barrel. Prices were down 6.9 percent for the week, the second consecutive weekly loss. The posted price closed at $94.07, according to Plains All American.

Natural gas prices on the NYMEX rose three of five trading days, beginning with a 39-cent jump Monday and a 52.6-cent rise Wednesday. Prices added 41.6 cents Friday, sending prices above $7 per Mcf. The price ended the week at $7.016 per Mcf.

“I believe it is the high inflation numbers that has oil markets concerned,” commented Bruce Bullock, Director, Maguire Energy Institute at the SMU Cox School of Business, to the Reporter-Telegram by email. “With both the CPI and PPI posting 40-year highs, the oil market is now convinced of another significant rate hike by the Federal Reserve – ¾ of a point to a full percentage point in order to slow the economy down. That significantly increases the chance of an eventual recession and lower demand for oil.”

In his daily newsletter, Edward Moya, senior market analyst, The Americas at Oanda, credited an impressive retail sales report for boosting crude prices Friday, saying the sales report illustrated how strong the US economy remains. He added that it appears likely President Biden’s trip to the Middle East this week will not lead to an increase in oil supplies.

“The oil market was down earlier in the week on demand destruction fears, so (today’s) retail sales report and University of Michigan consumer sentiment data helped undo some of that,” Moya wrote.

Looking ahead, he said a big question mark for oil prices is how China’s weakening economic data and possibly improving COVID situation will keep their crude demand outlook.

Further complicating the outlook for oil, he added, is the revival of Libya’s production. Bloomberg reported Friday that Libya, a member of the Organization of Petroleum Exporting Countries, is restarting its oil exports and production from all of its fields after reaching a deal with protestors, ending a months-long blockade that had halved its output.

Wrote Moya, “There is always a lot of moving parts for figuring out what will drive oil’s next big move, but right now it seems this market is too tight to break below the $90 level.”

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