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Bloomberg
Oil edged higher in uneven trading, remaining within a narrow price band as traders weighed a souring US economic outlook against risks of supply disruptions from Russia.
West Texas Intermediate futures traded near $86 a barrel, struggling to hold onto gains while under pressure from equity markets. Equities slid as Fedex Corp. withdrew an earnings forecast, in what many analysts consider a harbinger of economic slowdown. Supporting oil prices, China’s economic data suggested stimulus measures there were ramping up demand. Even tepid signs of demand recovery from China taken with Opec’s recent moves to support prices appear to have established a basic footing for the oil market around $85 a barrel.
“The market has gained confidence that both OPEC+ and US SPR refills will be price supportive in the low $80’s, helping crude find a floor in the near term,†said Rebecca Babin, a senior energy trader at CIBC Private Wealth Management.
Global oil consumption is being threatened by a darkening economic outlook. A hawkish US Federal Reserve, the risk of a recession in Europe due to a severe energy crisis, and China’s continued Covid-19 lockdowns are all adding pressure to the commodity. Diesel prices —often correlated to the global growth outlook — have slumped this week and several banks have cautioned on the outlook.
Also limiting oil price gains, the Bloomberg dollar gauge traded near a record this week on the outlook for tighter monetary policy. A rising greenback makes commodities more expensive for buyers outside of the US.
Despite the more ominous economic picture, Russian supply disruptions remained a wildcard in oil markets. In an effort to stave off a looming energy crisis this winter stemming from curtailed Russian flows, Germany seized the local unit of Russian oil major Rosneft PJSC, including stakes in three refineries.
One of the plants, PCK Schwedt, is now preparing for potential retaliation from Russia such as short-term restrictions in the crude supplied via the Cold War-era Druzhba pipeline.