Oil Posts First Quarterly Loss in Two Years as Recession Fears Grow
Oil shed nearly 25% to post its first quarterly loss in more than two years as escalating fears over a global economic slowdown and a stronger dollar overshadowed concerns of tightness in oil supplies.
West Texas Intermediate settled below $80 a barrel Friday, down from a high of above $100 at the beginning of the quarter. Crude has been battered by the dollar’s surge to a record over recent weeks, as central bank rate hikes darken the outlook for global growth.
The shrinking price is a concern for the Organization of Petroleum Exporting Countries, which has signalled its willingness to protect oil prices. OPEC+ is discussing plans for an output cut, which could stem the slide and give the market more direction. Analysts from RBC Capital Markets to JPMorgan Chase & Co. have said the producer group could pull anywhere between 500,000 to 1 million barrels a day of supply.
“Next week’s OPEC+ meeting is the next big catalyst but expect trading until then to be choppy and reactive to dollar moves,” said Rebecca Babin, a senior energy trader at CIBC Private Wealth Management.
Meanwhile, China issued new crude import and fuel export quotas as it seeks to revive its economy, which has been hard hit by Covid-19 lockdowns and a housing slump. Crude prices rallied after the quota was announced, while the giant oil product allocation for exports weighed on profits from turning crude into refined fuels. Factory activity in the Asian nation struggled for momentum in September, while services slowed, data released Friday show.
- WTI for November delivery fell $1.74 to settle at $79.49 a barrel.
- The more-active Brent contract for December settlement dropped $2.04 to close at $85.14 a barrel.
Widely watched time spreads in US oil futures have been ticking higher. The spread between the nearest two December futures contracts was at its strongest level in a month, indicating traders are growing steadily more bullish on the market’s outlook.
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