Oil set for 1st quarterly drop since 2020

OIL headed for its first quarterly loss in more than two years as escalating fears over a global economic slowdown and a stronger dollar overshadowed the prospect for tightening supply. 

West Texas Intermediate (WTI) futures climbed last Friday to trade near US$82 (RM381.30) a barrel but prices are down 22% this quarter. Crude has been roiled by the surge in the dollar to a record over recent weeks, as aggressive central bank rate hikes darken the outlook for global growth. 

Prices gained last Friday as the dollar eased from its highs. There was also support from a new batch of crude import quotas in China, while fuel markets were pressured as a giant batch of export quotas was also issued. 

Traders are also grappling with the looming risk of reduced supplies. The OPEC and its allies is set to meet next week, and is already discussing plans for an output cut. Analysts from RBC Capital Markets to JPMorgan Chase & Co have said the producer group could cut anywhere between 500,000 to one million barrels a day of supply. 

“The risk to supply continues to be a supporting theme,” said Ole Hansen, head of commodities strategy at Saxo Bank, referring to possible OPEC+ cuts. “The market remains troubled by forces pulling in opposite directions.” 

The economic recovery in China continues to be challenged by lockdowns in major cities as well as a property market downturn. Factory activity struggled in September, while services slowed, data released last Friday show. 

WTI for November delivery gained 1.4% to US$82.38 a barrel at 10:19am in London last Friday. 

Brent for November settlement, which expires Friday, rose 1.2% to US$89.52 a barrel. 

Widely watched time spreads in US oil futures have been ticking higher. The close-watched spread between the nearest two December futures contracts was at its strongest level in a month, indicating traders are growing steadily more bullish on the market’s outlook. — Bloomberg 

  • This article first appeared in The Malaysian Reserve weekly print edition.