Oil prices are poised for their steepest weekly decline since March, as worries of sluggish global growth and reduced fuel demand intensify due to macroeconomic challenges. Brent futures inched up by 7 cents to $84.14, while U.S. West Texas Intermediate crude futures rose 4 cents to $82.35.
Experts anticipate an 11.7% decline for Brent and a 9.3% drop for WTI this week. Despite this somber outlook, the robust U.S. job growth, exceeding economists’ predictions at 336,000 new jobs in September, could provide short-term support for oil demand. Unfortunately, the substantial rise of the U.S. dollar resulting from job growth adversely impacts oil demand, as it makes the commodity relatively more expensive for holders of other currencies.
In other recent developments, Russia lifted the ban on diesel exports for shipments delivered to ports through pipelines. However, companies are still mandated to sell at least 50% of their diesel production domestically. Consequently, the price difference between gasoil and Brent futures initially descended to the lowest level since July but rebounded afterwards.
The ongoing sell-off in oil prices is driven by concerns surrounding the state of the global economy and the future of oil demand, according to analyst Bjarne Schieldrop. These anxieties have been compounded by the recent resurgence of COVID-19 cases and the potential impact on economic recovery.
However, some relief has come from Chinese travel activity, which has provided a semblance of support to oil prices. During the mid-autumn and National Day holidays, year-on-year travel activity saw an impressive 71.3% increase, and a 4.1% rise compared to 2019.
This article includes additional reporting by Stephanie Kelly, Robert Harvey, Sudarshan Varadhan, and has been edited by William Maclean, Sharon Singleton, Louise Heavens, and David Gregorio.
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