Oil prices in global markets have declined for a third week straight the longest losing run this year amid concerns over a possible slowdown and US banking sector turmoil. According to a Bloomberg report investors are inclined to sell to avoid continued instability.
The report noted that among the global oil benchmark indices, on Friday, West Texas Intermediate advanced above $69 a barrel on Friday, but the US crude benchmark has declined by close to 10 per cent this week after a four-day skid.
On Thursday, trading was marked by a brief-but-dramatic plunge with prices collapsing to touch the lowest intraday level since 2021 at one point.
According to the report, the price of crude oil has taken a hit due to increasing worries about the possibility of the US economy falling into a recession, which could negatively impact energy demand. This comes at a time when investors are already keeping an eye on the instability of regional banks.
Adding to the pressure, Saudi Arabia, a major oil exporter and leader of the OPEC+ alliance, has reduced prices to Asia. Despite the decision by OPEC+ to reduce production starting this month, oil prices have fallen by 14 per cent so far this year, the report said.
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The retreat has come despite signs of strength in the physical oil market, suggesting the selloff may be excessive.
Shell Plc Chief Executive Officer Wael Sawan said this week the market was actually “pretty tight,” the report said.
“While sentiment is negative at the moment, the market is in oversold territory and our balance sheet still shows that the market will be in deficit over the second half of the year, which should drive prices higher,” Warren Patterson, head of commodities strategy for ING Groep NV told Bloomberg.
In the recent sessions, time spreads have become narrower indicating a less tight market, the report said. The immediate spread for the global benchmark Brent, which is the difference between the two closest contracts, was at 19 cents per barrel in backwardation. A month ago, the figure was 37 cents per barrel in backwardation.
Iraq has not reached an agreement with Ankara to resume almost 500,000 barrels per day of Iraqi oil exports through Turkey. The dispute between Baghdad and the Kurdistan Regional Government has caused a halt in shipments from the Ceyhan port since the end of March.