Oil prices ended the week lower amid concerns of aggressive interest rate increases by the US Federal Reserve to fight inflation, which could weigh on economic growth.
Brent, the benchmark for two thirds of the world’s oil settled 3.6 per cent lower on the previous week at $82.78 on Friday. West Texas Intermediate, the gauge that tracks US crude, closed down 3.8 per cent at $76.68 a barrel.
Brent has shed more than 6 per cent after US Federal Reserve Chairman Jerome Powell indicated earlier this week that interest rates may need to increase further and at a faster pace than previously anticipated following stronger-than-expected US economic data for January.
“Decelerating growth continues to weigh on crude prices but if fears of a hard landing for the US economy are alleviated, WTI crude could find a home above the $80 a barrel,” said Edward Moya, senior market analyst at Oanda.
Meanwhile, jobless claims in the US increased by 21,000 to 211,000 in the week that ended on March 4, the largest increase in five months, according to the Labour Department.
However, the overall trend still indicates a tight labour market, analysts said.
“The latest reading of both initial and continuing jobless claims suggested a marginal softening in what is still, nonetheless, a tight US labour market,” said Jeanne Walters, senior economist at Emirates NBD.
“The readings should, however, be treated with some caution as they tend to be volatile … and may have been affected by unseasonable weather,” said Ms Walters.
Despite a sharp fall in natural gas prices, the European Central Bank will most probably raise interest rates by 50 basis points this month to tame persistent inflation in the eurozone, ECB President Christine Lagarde said in a report this week.
Annual inflation in the 20 countries that use the euro decreased to 8.5 per cent in February, from 8.6 per cent in the previous month, according to the EU’s statistics agency.
But core inflation, which excludes the food and energy sectors, rose to 5.6 per cent last month, from 5.3 per cent in January, the data showed.
Russian Foreign Minister Sergey Lavrov said that agreements with the Opec+ alliance remain in “full force”, state news agency Tass reported on Thursday.
“[The agreements] remain in full force until the end of this year, after which the members of the Opec+ group will consider the situation and make new decisions,” said Mr Lavrov at a press conference, following a meeting with Saudi Foreign Minister Prince Faisal bin Farhan.
The group of 23 oil-producing countries slashed its collective output by 2 million barrels per day in October last year as concerns of an economic slowdown weighed on the outlook for fuel demand.
An economic recovery in China, the world’s largest crude importer, is set to drive crude oil demand to record levels this year, according to the International Energy Agency.
Earlier this week, Opec Secretary General Haitham Al Ghais said he was “cautiously optimistic” on China's reopening but warned that a slowdown in the US and the EU could dampen crude oil demand in 2023.
“There is phenomenal demand growth in Asia [but] what concerns us more is actually the slowdown we see in Europe and the US in terms of the financial situation [and] the inflation,” Mr Al Ghais said at the CeraWeek energy conference in Houston on Tuesday.
Last month, Opec raised its 2023 oil demand forecast by 100,000 bpd amid expectations of an economic rebound in China.
The group expects global oil demand to grow by 2.3 million bpd this year, which is higher than its previous growth estimate of 2.2 million bpd.
China alone will count for about 500,000 bpd to 600,000 bpd of the demand improvement, the Opec chief said.