Oil Edges Higher After Choppy Week as Slowdown Concerns Linger

(Bloomberg) -- Oil gained on Friday after a volatile week as concerns over a global economic slowdown continue to hang over the market.

West Texas Intermediate rose toward $85 a barrel after closing little changed on Thursday. Investors are juggling slowdown fears against signs of oil market tightness, while fluctuating risk sentiment in broader markets has regularly whipsawed crude prices. A strong dollar has added to headwinds.

See also: Loss of Hedgers Hits US Oil Trading While Brent Rebounds

“While oil supplies clearly remain tight, a key overhang for oil prices may continue to revolve around the build-up in global growth risks,” said Jun Rong Yeap, a market strategist at IG Asia Pte. in Singapore. “Overall upside for oil prices may remain capped.”

Oil has a lost a third of its value since early June due to slowdown concerns and aggressive monetary policy from central banks to tame inflation, However, the market is facing a period of supply uncertainty in coming months as OPEC+ cuts output and the European Union implements sanctions on Russian flows. 

The impact of the looming sanctions on Russia, which will include petroleum products from early next year, is already filtering through the broader market. Croatia is working to wean its oil refinery off of Russian feedstock, while some Indian refiners have halted new spot oil purchases.

Brent remains steeply backwardated, a bullish structure where near-dated contracts are more expensive than later-dated ones. The prompt time spread was $1.88 a barrel in backwardation, compared with $1.48 a week earlier. 

The outlook for Chinese demand also remains uncertain. President Xi Jinping signaled on Sunday that the nation would stick with its Covid Zero policy, but officials are said to be in debating whether to cut quarantine for inbound travelers. Recent oil buying by refiners has also been lackluster.

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