The narrative of tight supplies that has driven crude’s rally since June has faded amid prospects that the U.S. will ease sanctions on Iran and Venezuela. Meanwhile, faltering growth in China and abysmal economic data in Europe have dimmed the outlook for demand. In the physical market, Marathon Petroleum Corp. is shutting the third-largest oil refinery in the U.S. after a fire.
Crude has had a volatile week, with prices often struggling for direction amid thin summer trading. Oil’s open interest is hovering near January lows, while the U.S. Oil Fund ETF reported its biggest daily outflow since 2020 on Wednesday. West Texas Intermediate futures settled below US$80 a barrel, cementing a 1.7 per cent weekly decline.
Prices pared some of this week’s drop on Friday as Federal Reserve Chair Jerome Powell’s speech on the path for interest rates largely matched traders’ expectations. In addition to Powell’s remarks, China unveiled a further easing of its mortgage policies to halt a slump in its ailing property market.
Crude is now trading roughly where it started the year, despite efforts by OPEC+ linchpins Saudi Arabia and Russia to boost prices by curbing supply. Lingering expectations that the Fed isn’t completely done with its campaign of monetary tightening have also added to headwinds.Brent for October settlement advanced US$1.12 to settle at US$84.48 a barrel.