Dubai: Oil headed for its first quarterly loss in more than two years as escalating fears over a global economic slowdown and a stronger dollar overshadowed the prospects for tightening supply.
West Texas Intermediate swung between gains and losses near $81 a barrel on Friday but prices are down 23 per cent this quarter. Crude has been roiled by the surge in the dollar to a record over recent weeks, as aggressive central bank rate hikes darken the outlook for global growth.
Traders are also grappling with the looming risk of reduced supplies. The Organization of Petroleum Exporting Countries and its allies is set to meet next week, and are already discussing plans for an output cut. 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.
“The risk to supply continues to be a supporting theme,” said Ole Hansen, head of commodities strategy at Saxo Bank, referring to possible OPEC+ cuts. “The market remains troubled by forces pulling in opposite directions.”
On Friday, traders also had to grapple with new crude import and oil product export quotas from China, the world’s largest crude importer. China is seeking to revive is economy which has been hit by Covid lockdowns and a housing slump, but the giant oil product allocation for exports could weigh on markets for refined fuels. Factory activity in the Asian nation struggled for momentum in September, while services slowed, data released Friday show.
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.