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Oil on track for sharpest weekly decline since March

Texas oil well

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Oil prices were on track for their steepest weekly decline since March despite rising on Friday, driven by concerns that higher-for-longer interest rates will slow global growth and hammer fuel demand.

Both benchmarks had surged to 2023 highs last week, but Brent has dropped 11.6% and WTI by about 9% this week.

The oil slump has coincided with a steep drop in U.S. Treasury prices to 17-year lows, on concerns the U.S. Federal Reserve will keep rates higher for longer and growing worries about government spending and a ballooning budget deficit in the United States, the world’s top oil consumer.

On Friday, Brent futures were up 25 cents, or 0.3%, at $84.32 at 0621 GMT, while U.S. West Texas Intermediate crude futures were up 32 cents, or 0.4%, at $82.63, recovering slightly from a 2% decline on Thursday.

“Oil prices are stabilizing after a brutal week that saw a relentless bond market selloff trigger global growth worries,” said Edward Moya, an analyst at OANDA.

“The worst week for crude since March is starting to attract buyers given the oil market will still remain tight over the short-term,” Moya said.

JPMorgan said in a note it expected oil demand growth to be healthy but slower in the last quarter of 2023, while the National Australia Bank said it saw the recent dip in prices as temporary and forecast a deficit market this quarter.

“We think that once markets start paying attention to falling global oil stockpiles, Brent oil futures will likely creep back up above $US90/bbl,” the Commonwealth Bank of Australia said in a note on Friday.

U.S. government data this week showed a sharp decline in U.S. gasoline demand, with economic data showing the U.S. services sector had slowed. A key survey revealed that euro zone economy probably shrank last quarter, while a pricey dollar kept a lid on buying capacity of countries around the world.

All eyes on Friday will be on the U.S. monthly jobs report for signs of how strong the economy is.

“The non-farm payroll data tonight, the US CPI, and China’s economic data next week will be key to steering oil’s movements. A resilient economic front can be a short-term positive sign for the demand outlook,” said Tina Teng, an analyst at CMC Markets.

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