Oil set for first weekly loss since banking turmoil last month

Oil headed for the first weekly loss since last month’s banking crisis, weighed down by concerns over demand and the US economy.

West Texas Intermediate futures dipped toward $77 a barrel and are more than 6 per cent lower this week. Fuel markets from gasoline to diesel are flashing signs of weakness, while the Federal Reserve said the US economy had stalled in recent weeks. The prospect of further monetary tightening has added to headwinds.

“The acute fall in refining margins in Asia raises some valid concerns about how Asian oil demand will fare,” said Vivek Dhar, director of mining and energy commodities research at Commonwealth Bank of Australia.

There’s “credible concerns that demand for petrol and diesel may already be eroding.”

Oil has given up most of the gains put on after OPEC+ blindsided markets with a surprise pledge to cut production, as persistent concerns over the near-term outlook continues to pressure prices. Still, many are betting that China’s rebound from Covid curbs will underpin a crude rally later this year.

The US could begin to refill its Strategic Petroleum Reserve as soon at the third quarter of 2023 if prices are favourable, a US official said.

The timing will depend on infrastructure maintenance and how well the administration can manage a sale of 26 million barrels by the end of June.

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