Oil Set for Weekly Loss on Demand Pessimism
(Bloomberg) -- Oil headed for its biggest weekly decline since the middle of July as a streak of disappointing economic data from the U.S. and elsewhere added to fears a global recession is coming.
Futures in New York edged higher Friday, but are down around 6% this week. A key measure of American service industry activity dropped to the lowest in three years last month, while an employment gauge registered its weakest print in more than five years. That came after payrolls and manufacturing numbers fell short of estimates earlier in the week.
The deteriorating U.S. economy -- and more signs of weakness in China and Germany -- is worsening what was an already fragile demand outlook. While the record gains in oil after the Sept. 14 attacks on Saudi Arabia evaporated largely due to the kingdom quickly restoring production, the increasing economic gloom has also played a part. OPEC producer Nigeria warned Thursday that oil demand will be “very challenging” next year.
“It’s clear the backdrop has weakened recently,” said Daniel Hynes, a senior commodity strategist at Australian & New Zealand Banking Group Ltd. in Sydney. “However, the market is taking a glass half empty approach to it at the moment” as a significant fall in oil demand hasn’t been seen yet, he said.
West Texas Intermediate for November delivery rose 20 cents, or 0.4%, to $52.65 a barrel on the New York Mercantile Exchange as of 7:29 a.m. in London. It dropped for an eighth consecutive session on Thursday and is down $3.27 this week, the most since July 19.
Brent for December settlement climbed 0.4% to $57.92 a barrel on the ICE Futures Europe Exchange. The contract has fallen 6.4% this week. The global benchmark crude traded at a $5.37 premium to WTI for the same month.
A key U.S. factory index fell to a 10-year low on Tuesday as businesses held back investments amid tariffs and the U.S.-China trade war. That was followed data Wednesday showing hiring at U.S. companies cooling, while quarterly sales figures from automakers such as Ford Motor Co. are adding to the concern.
While Washington and Beijing are set to restart high-level trade negotiations next week, the chances of a short-term breakthrough don’t appear to be high. Meanwhile, the U.S. imposed tariffs on European goods including aircraft and dairy products this week.
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