Doha: Oil prices settled lower in volatile trading yesterday, with both benchmarks recording their biggest weekly declines in months, as growing recession fears negated any supply woes after weak economic data from China, Europe, and the United States. Brent crude dropped 5 cents lower at $76.10 per barrel.
US West Texas Intermediate crude fell 44 cents lower at $71.02 a barrel. Both crude benchmarks posted weekly losses of around 10 percent each.
It was the biggest weekly decline since April for the US WTI futures, and since early August for Brent. The slightly higher-than-expected rise in the US producer prices index (PPI), and news of a partial restart on the Keystone Pipeline pushed the benchmarks lower.
Keystone shut earlier last week after an oil leak in Kansas. The 12 months through November PPI increased 7.4 percent amid a jump in the costs of services, according to a report from the US Labor Department. The increase may make it more likely that the Federal Reserve will “step on the accelerator” on interest rate hikes, furthering fears of a looming recession, analysts said. In China, surging COVID-19 infections will likely depress economic growth in the next few months despite some restrictions being eased.
Asian spot LNG prices rose last week on positive sentiment after China eased COVID-19 restrictions and some major players’ made spot purchases, and European LNG prices remained at a 10-week high.
The average LNG price was $37 per mmBtu, up $2 from the previous week. In a clear bullish demand signal, Chinese authorities have dramatically loosened its strict measures this week, slashing testing, quarantine and lockdown requirements, after three years of a “zero-COVID” policy.
In Europe, LNG prices were at 10-week highs, as temperatures fell below seasonal norms, forcing strong withdrawals from storage, however, record LNG imports still support the market. Even though inventories are well-filled, uncertainty of how inventories will be at the end of the winter is starting to kick in.
Dutch TTF gas was trading near $42 per mmBtu on Friday. In the US, gas futures rose 28 cents, or 5 percent, yesterday to settle at $6.25 per mmBtu on forecasts for much colder weather and higher heating demand through late December than previously expected. That colder weather should force utilities to pull more gas from storage in the coming weeks. For the week, the contract was down about 1 percent after falling about 11 percent last week.
