Down 10% over the week, the price of a barrel of Brent fell sharply against a backdrop of increasingly gloomy economic prospects and an upsurge in Covid cases in China.
Good news for purchasing power. Oil accelerated its decline on Friday after a week of staggering lossesinvestors worried about a resurgence of covid-19 cases in China, in addition to a depressed global economic panorama.
Around 4:10 p.m., a barrel of American West Texas Intermediate (WTI) for delivery in December lost 3.91% to 78.45 dollars.
Its European equivalent, Brent from the North Sea for delivery in January 2023 fell 3.85% to 86.32 dollars a barrel.
“Oil prices continue to decline amid an increasingly bleak economic outlook and a resurgence of Covid cases in China,” said Oanda analyst Craig Erlam.
“Oil is heading for a sizable weekly loss” of 12% for WTI and 10% for Brent “due to heightened fears over a bleak demand outlook,” said FXTM analyst Lukman Otunuga.
China, “the world’s largest oil importer, is facing its worst epidemic upsurge in months,” said Lukman Otunuga.
The National Health Commission (NHC) on Thursday reported the highest number of new coronavirus cases in China since April.
This resumption of contamination risks “leading to new restrictions and confinements, thus threatening demand in the second world economy”, continues Craig Erlam.
Thus, on the investor side, “no one seems tempted to take long oil positions before the weekend” with the increase in Covid-19 cases in China, notes Stephen Innes, of SPI.
Towards the lowest point of 2022
Brent crude came close to the floor of 85 dollars a barrel on Friday. The two global crude benchmarks are thus approaching their September levels, when they were at their lowest since January.
This then motivated the decision of the Organization of Petroleum Exporting Countries and their allies (OPEC+) to drastically reduce the production target of 2 million barrels per day for November.
The alliance was then justified by arguing that the prices did not reflect the current tensions on the world supply of crude.
Prices, if they stay at this level, could “test the patience” of the group, according to Craig Erlam, who could thus make further cuts at the next meeting scheduled for early December.