SINGAPORE - Oil headed for a third weekly loss as a deteriorating global economic backdrop stoked demand concerns and a buoyant US dollar made crude more expensive for most buyers.
West Texas Intermediate edged higher above US$85 a barrel, but remains on track to finish the week more than 1 per cent lower.
Among bearish signals on Thursday, the US Department of Energy dialled back expectations that a restocking of the nation's strategic reserves was imminent. In Asia, China may allow more fuel exports, potentially reflecting weak domestic consumption in the top importer as growth slows.
Crude is on course for the first quarterly loss in more than two years, having reversed all the gains seen in the wake of Russia's invasion of Ukraine. It has retreated alongside global equities and other commodities, including copper, as investors recalibrated their expectations for the economic outlook. In the United States, a swathe of leading companies have flagged rising risks this week.
"Sentiment in the oil market remains largely negative, with Chinese demand concerns lingering," said Mr Warren Patterson, head of commodities strategy at ING Group in Singapore. "The broader strength that we have seen in the US dollar, coupled with expectations of a more hawkish Fed, will not be very helpful for the bulk of the commodities complex."
Oil has also come under pressure from a strong US dollar, with a Bloomberg gauge of the currency trading near a record this week on the outlook for tighter monetary policy. A rising greenback - which has helped push the renminbi to its lowest since 2020 - makes commodities more expensive for buyers outside the US.
With prices in retreat, several banks have cautioned on the outlook. Standard Chartered Bank said the global oil market has swung into a "large surplus" this quarter, while Morgan Stanley and UBS Group both cut their near-term forecasts amid mounting fears of recession in major economies.
Widely watched time spreads have been volatile. Brent's prompt spread - the difference between its two nearest contracts - was US$1.16 a barrel in backwardation, compared with US$1.13 a week ago and more than US$2 last month. BLOOMBERG