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Oil prices are on track to post another weekly loss as demand concerns continue to dominate the narrative.
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Recession fears continue to be the main factor weighing on oil prices, although a strong dollar also made oil less affordable for buyers.
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The EU embargo on Russian crude oil is set to come into effect in just three months and the fuels embargo in 5, both of which will push oil prices higher.
Crude oil is about to book its third consecutive week of losses despite several spikes as worry about demand remains stronger than worry about supply.
A strong dollar also pressured oil prices as it made the commodity less affordable for buyers in the dollar-dominated oil market.
At the time of writing, Brent crude was trading at $91.24 per barrel, with West Texas Intermediate at $85.39 per barrel.
Recession fears, however, remain the biggest reason behind the downward trend. The World Bank on Thursday warned that the risk of a global recession had risen recently, noting the rush by central banks to raise interest rates. According to the WB, if the rate hikes were done too fast, this would push the global economy into a slowdown.
“Central banks around the world have been raising interest rates this year with a degree of synchronicity not seen over the past five decades — a trend that is likely to continue well into next year,” the World Bank said.
“Global growth is slowing sharply, with further slowing likely as more countries fall into recession. My deep concern is that these trends will persist, with long-lasting consequences that are devastating for people in emerging market and developing economies,” the WB’s president, David Malpass commented.
A recession would damage oil demand just as it would damage pretty much everything else as well, which would help tame inflation but at a very high cost. Alternatives, however, are scarce. The European Union has reiterated its dedication to sanctions on Russia, with an embargo on Russian crude set to come into effect in three months and an embargo on fuels coming into effect in five.
This is bound to affect prices for both crude and fuels, especially diesel as global diesel stocks are tighter than usual at the moment. Until the embargos come into effect, however, the downward pressure on prices will remain substantial, keeping a lid on benchmarks.
NB: Irina Slav wrote this article for Oilprice.com
