Oil is recovering from a six-month high, slowing weekly declines

(Bloomberg) — Oil prices plunged to a six-month low this week as a weaker dollar boosted trader demand for assets.

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West Texas Intermediate crude closed above $86 a barrel, ending a similarly volatile week for the past seven weeks. Earlier in the week, benchmarks for both WTI and Brent fell to year-lows. The dollar rallied for most of the week on concerns that an escalation of China’s COVID-19 lockdown could weaken oil demand and deal another blow to current commodity prices. But on Friday, oil and other risky assets began to fall sharply.

According to Onda senior market analyst Ed Moya, a big rally in the market would help drive oil prices higher. “Inflation in China is encouraging and the central bank does not need to tighten aggressively in the coming months,” he said.

Crude fell to around $40 earlier this year and the market has been volatile since Russia invaded Ukraine. Daily volume was below the 200-day moving average over the period from March. Commodity market liquidity was put to the test amid Europe’s energy crisis when ministers from the region met in Brussels on Friday.

The drop in oil this week has been a test for the Organization of the Petroleum Exporting Countries and its allies. They announced a nominal output cut earlier this week, prompting a temporary boost. This surprised many traders who had not expected this change from OPEC+.

Despite the current market slowdown, given the potential for additional releases from strategic crude reserves, U.S. officials are looking for ways to see oil prices rise later this year. Officials have warned that prices could rise when EU sanctions on Russian electricity come into force in December if no other measures are taken.

Crude inventories rose by 8.8 million barrels, above expectations, U.S. government data showed Thursday. Also, the gasoline demand gauge is below its quarter 2020 level.

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For the second week, Nafta posted a loss on demand.

Investing.com – Suddenly U.S. investors were mixed on Friday as oil prices signaled a slump, but fears of a recession led to steep weekly losses. The world is in trouble.

London Brent futures were up 0.4% at $88.88 a barrel, while US West Texas Intermediate futures were down 0.4% at $83.20 a barrel as of 8:30 p.m. ET (00:30 GMT). Both contracts are expected to lose more than 4% for the week, their second consecutive week of losses.

Comments from the US Federal Reserve, as well as interest rate hikes in Canada and Europe, weighed on crude oil sentiment as the dollar fell to a 20-year low.

U.S. crude oil inventories have continued to rise in recent weeks, data showed Thursday. However, traders noted the government’s construction of releasing crude oil from the country’s strategic petroleum reserves.

Oil demand appears strong, as evidenced by record US gasoline inventories last month. Gasoline prices have fallen from historic highs and demand is also benefiting.

By bemaad

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