Oil trims weekly gain

OIL pared its weekly gain as investors shied away from risky assets on a dimming outlook for China and the wider global economy. 

West Texas Intermediate (WTI) slid below US$88 (RM415.36) a barrel last Friday as a risk-off tone spread across wider markets. China’s economic growth outlook is darkening as investors bet Beijing will be slow to exit Covid Zero, while in Europe the French and Spanish economies slowed. 

Crude is still up around 3% for the week and there are signs of extreme tightness in US refined products markets. The nearest time spread for petrol — a gauge of market strength — closed at its strongest level in a decade on Oct 27 amid dwindling fuel inventories. 

Oil is on course to advance in October following a run of four monthly declines as slowdown concerns escalated. A decision by the OPEC and its allies to cut production in November and loom- ing European Union sanctions on Russia has tightened the outlook for supply. In addition, refiners in top importer China have snapped up millions of barrels as they plan to ramp up fuel exports. 

“Things have calmed down on the oil market,” said Norbert Ruecker head of economics at Julius Baer. “The market prepares for the announced production curtailments from the petro-nations, fears a broader economic slowdown, and listens to the geopolitical noise including the European oil embargo and the Western world idea of an oil price cap” 

WTI for December delivery fell 1.7% to US$87.61 a barrel at 10:08 am in London last Friday. 

Brent for December settlement lost 1.1% to US$95.86 a barrel. 

Widely-watched time spreads continue to hold in backwardation, a bullish pattern signalling tightness. Brent’s prompt spread — the difference between the two nearest contracts — was US$1.97 a barrel, up from US$1.27 a month ago. 

Reflecting the year’s robust crude market, Shell plc and TotalEnergies SE released bumper earnings on Oct 27, drawing another round of criticism from US President Joe Biden. — Bloomberg

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