Oil on Friday posted a large loss the first week of trading in the new year as demand uncertainty continued to hang over the market.
West Texas Intermediate for February delivery settled at US$73.77 per barrel, posting the largest weekly loss in a month, 8.08 percent.
Brent Crude for March delivery fell 0.15 percent to US$78.57, dropping 8.54 percent from a week earlier.
Photo: Reuters
Saudi Arabia cut prices for crude sold to Asia and Europe for next month, signaling concerns over the near-term outlook.
Meanwhile, China is battling a surge in COVID-19 cases after restrictions were lifted, although mobility is set to rise as the Lunar New Year holidays approach.
Earlier in the session, prices pared weekly losses as a slew of US economic data indicated a resilient labor market that nevertheless might give room for the US Federal Reserve to slow interest-rate hikes.
Crude’s weak start to the year has come as forward curves continue to signal signs of oversupply.
The IMF last week warned that one-third of the global economy could be in recession this year, while US Federal Reserve Bank of St Louis President James Bullard signaled that US interest rates were not yet sufficiently restrictive.
Still, oil prices might exceed US$140 per barrel this year if Asian economies fully reopen after COVID-19-related lockdowns, hedge fund manager Pierre Andurand said.
Meanwhile, the White House is delaying the replenishment of the nation’s emergency oil reserve after deciding the offers it received were either too expensive or did not meet the required specifications, people familiar with the matter said on Friday.
The US Department of Energy (DOE) rejected the several offers it got for a potential purchase next month, said the people, who asked not to be identified as details of the process have not been published.
The department last month outlined its intention to begin restocking the Strategic Petroleum Reserve, starting with a purchase of 3 million barrels next month. The plan follows the historic 180 million-barrel release of oil from the reserve ordered by US President Joe Biden as he sought to tame the high gasoline prices in the aftermath of Russia’s invasion of Ukraine.
The department is to put off the purchase it had originally planned for next month, but its program, which used a new approach that accepts fixed-price offers, would continue, one of the people said.
The Biden administration had planned to start buying crude when it dropped to about US$70 per barrel. Oil fell during the fourth quarter and US benchmark prices fell close to those levels last month.
“DOE has put forth a long term plan to transition from release to replenishment, and we’re committed to doing so in a manner that provides a fair deal for taxpayers,” the department said in a statement on Friday.
“DOE will only select bids that meet the required crude specifications and that are at a price that is a good deal for taxpayers,” it said. “Following review of the initial submission, DOE will not be making any award selections for the February delivery window.”
The reserve — the world’s largest emergency supply — was created in 1975 in the wake of the Arab oil embargo.
Additional reporting by staff writer
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