Oil set to drop on concerns over slowing demandwritten by Bella Palmer
Oil prices were dented by news of rising COVID-19 cases in China, which raised the prospect of more disruptive lockdown measures in the country
Oil prices rose on Friday after a series of bruising sessions but set to end the week lower as hawkish signals from the Federal Reserve and rising COVID-19 cases in China brewed concerns over slowing global demand.
Crude markets plummeted on Thursday after hawkish comments from St. Louis Fed President James Bullard suggested that the bank intends to raise interest rates by at least another 150 basis points, citing a limited impact on inflation from recent hikes. This ratcheted up fears that U.S. economic growth will slow dramatically in the coming quarters, amid pressure from high interest rates and stubborn inflation.
London-traded Brent oil futures rose 0.7%, while West Texas Intermediate crude futures rose 1% by 05:29 GMT. Both contracts sank 3.1% and 4.1% on Thursday, respectively, and were set to close the week 6% and 7% lower.
Oil prices were also dented by news of rising COVID-19 cases in China, which raised the prospect of more disruptive lockdown measures in the country.
The world’s largest oil importer is grappling with its worst outbreak in seven months, and is widely expected to clamp down further on economic activity to prevent the spread of infections.
Rising cases in China dispelled hopes that the country will scale back its strict zero-COVID policy in the near-term. A series of weak economic readings this week also showed that the world’s second-largest economy is struggling to shore up growth amid a slew of COVID lockdowns.
Slowing crude demand in China and rising interest rates were the two biggest weights on crude prices this year, dragging them well below a 14-year high hit in April.
These concerns also largely offset signs of tightening crude supply this week. Data released on Wednesday showed that U.S. crude inventories fell by far more than expected in the prior week, despite an over 4 million barrel release from the Strategic Petroleum Reserve.
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