Oil futures ticked higher on Friday but headed a third weekly loss in a row, feeling pressure from fears aggressive tightening of monetary policy by central banks will lead to a global economic slowdown.
Price action
- West Texas Intermediate crude for October delivery CL.1, +1.57% CL00, +1.57% CLV22, +1.57% rose 16 cents, or 0.2%, to $85.26 a barrel on the New York Mercantile Exchange.
- November Brent crude BRN00, +1.71% BRNX22, +1.71%, the global benchmark, gained 49 cents, or 0.5%, to $91.33 a barrel on ICE Futures Europe.
- Back on Nymex, October gasoline RBV22, +0.34% fell 0.9% to $2.4039 a gallon, while October heating oil HOV22, -0.27% traded nearly flat at $3.2086 a gallon.
- October natural gas NGV22, -3.63% fell 4.6% to $7.944 per million British thermal units.
Market drivers
Brent oil futures were on track for a weekly loss of 1.7%, while WTI oil traded 1.8% lower for the week, with the commodity suffering alongside stocks and other assets perceived as risky.
The moves follow an U.S. August consumer-price index reading earlier this week that showed inflation continuing to run hotter than expected. That cemented expectations for the Federal Reserve to lift the fed-funds rate by at least another 75 basis points, or 0.75 percentage point, when policy makers meet next week.
“Recent economic reports have shown strength in global trade and industrial output, but forward-looking financials markets are signaling a slowdown ahead,” analysts at StoneX’s energy team in Kansas City wrote in Friday’s newsletter.
Weakness in technology and a few other sectors are “showing slower growth, especially with futures pricing in another 2% increase in the Fed funds rate” before April 2023, they said. “A slowdown is likely, but the likelihood of an energy price collapse…is much lower this time around due to lack of investment over the last few years.”
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A strong dollar, driven by expectations for aggressive Fed tightening, has also been a weight on crude and other commodities priced in the unit. A stronger dollar makes them more expensive to users of other currencies.
The ICE U.S. Dollar Index DXY, -0.18%, a measure of the currency against a basket of six major rivals, rose 1% this week, trading near a 20-year high.
Hear from top Wall Street energy analysts at the Best New Ideas in Money Festival on Sept. 21 and Sept. 22 in New York. RBC’s Helima Croft will be there.