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Futures Movers: Oil posts a third straight weekly loss

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Oil futures saw a slight rise on Friday but marked a third weekly loss in a row, feeling pressure from fears aggressive tightening of monetary policy by central banks will lead to a global economic slowdown.

Price action

West Texas Intermediate crude for October delivery
CL.1,
+0.25%

CL00,
+0.25%

CLV22,
+0.25%

rose by a penny to settle at $85.11 a barrel on the New York Mercantile Exchange.

November Brent crude
BRN00,
+0.20%

BRNX22,
+0.20%
,
the global benchmark, gained 51 cents, or 0.6%, to $91.35 a barrel on ICE Futures Europe. Brent and WTI were down a third straight week, with Brent down 1.6% and WTI losing 1.9% for the week, according to Dow Jones Market Data.

Back on Nymex, October gasoline
RBV22,
-0.55%

fell 0.5% to $2.4157 a gallon, ending the week with a 0.7% loss, while October heating oil
HOV22,
-0.54%

settled at $3.1725 a gallon, down more than 1% for the session, and more than 11% lower for the week.

October natural gas
NGV22,
-6.14%

fell 6.7% to $7.764 per million British thermal units, with prices down 2.9% for the week.

Market drivers

For the week, oil futures declined as the commodity suffered alongside stocks and other assets perceived as risky.

The moves follow an U.S. August consumer-price index reading earlier this week that showed inflation continuing to run hotter than expected. That cemented expectations for the Federal Reserve to lift the fed-funds rate by at least another 75 basis points, or 0.75 percentage point, when policy makers meet next week.

“Recent economic reports have shown strength in global trade and industrial output, but forward-looking financials markets are signaling a slowdown ahead,” analysts at StoneX’s energy team in Kansas City wrote in Friday’s newsletter.

Weakness in technology and a few other sectors are “showing slower growth, especially with futures pricing in another 2% increase in the Fed funds rate” before April 2023, they said. “A slowdown is likely, but the likelihood of an energy price collapse…is much lower this time around due to lack of investment over the last few years.”

Read: Oil’s crazy price moves aren’t really crazy at all

Also see: High fuel costs will continue to contribute to the rise in food prices

A strong dollar, driven by expectations for aggressive Fed tightening, has also been a weight on crude and other commodities priced in the unit. A stronger dollar makes them more expensive to users of other currencies.

The ICE U.S. Dollar Index
DXY,
-0.03%
,
a measure of the currency against a basket of six major rivals, was 0.7% higher this week, trading near a 20-year high.

There is “a lot of uncertainty overseas both on the supply side…and on the demand side” given lockdowns in China, an energy crisis in Europe and fears of a global recession, Colin Cieszynski, chief market strategist at SIA Wealth Management, told MarketWatch.

For the U.S., however, the most significant fundamental factor seems to be how long the government plans to keep running down the Strategic Petroleum Reserve, with midterm elections in about six weeks, and once they stop, “when and how quickly does the drawdown supply become refill demand,” he said.

Also see: Baker Hughes data show a weekly climb in active U.S. oil-drilling rigs

Hear from top Wall Street energy analysts at the Best New Ideas in Money Festival on Sept. 21 and Sept. 22 in New York. RBC’s Helima Croft will be there.

In One Chart: ‘Black Wednesday’ was 30 years ago — What the British pound has done since then

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