Oil prices fell in volatile trading on Friday, with both benchmarks recording their biggest weekly declines in months, as concerns about recession offset any supply issues after weak economic data in China, Europe and the United States were accelerating concerns about the recession offset.
U.S. West Texas Intermediate crude closed lower at $71.02 a barrel, a new low in 2022. Brent crude closed lower by 5 cents to $76.10 a barrel.
"Any concern about supply is secondary compared to economic concerns," said Robert Yawger, analyst at Ruisui .
Oil prices gained some support earlier in the session and rose more than 1% after Russian President Vladimir Putin said the world's largest energy exporter could cut production to cope with its crude oil export price cap.
However, the rise in US producer prices in November was slightly higher than expected, and news of a partial restart of the Keystone pipeline erased those gains and pushed the benchmark index down more than $1. Keystone closed earlier this week after a 14,000 barrels of oil spill in Kansas .
The U.S. Producer Price Index (PPI) rose slightly higher than expected in November due to rising service costs, according to a U.S. Department of Labor report.
Yawger said the growth could make it more likely that the Federal Reserve Fed will "step on the accelerator" rate hikes , thus raising concerns about an imminent recession. Both crude oil benchmarks have reported a weekly decline of about 10%. This is the biggest weekly decline in US WTI futures and Brent crude oil futures since April. Both Walter Zimmerman, chief technical analyst at ICAP (LSE ticker: NXGN), warned that if U.S. crude oil price falls below $70 a barrel, it could enter free fall and hit a low of $60 in the next few trading days. The market structure of the
WTI contract has changed to a positive spread trading next year for the first time since November 2020, with the recent delivery contract price lower than a year later. In the next six months, the Brent crude oil contract also switched to futures premium trading.
positive spread market shows that concerns about current supply have eased due to weak demand and traders are encouraged to enter the warehouse. In China, despite some restrictions being relaxed, the surge in COVID-19 infections could curb economic growth in the coming months economists said. Economists surveyed by Reuters predict that the U.S. economy will fall into a brief and slight recession in the next year. Forecasters expect the Fed to raise interest rates by 50 basis points (bps) on December 14.
ECB may also raise deposit rates by 50 basis points to 2% next week, although it is believed that the economy of euro zone has fallen into recession
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