Oil posted its biggest weekly drop since early May as the Federal Reserve signaled possible rate hikes and European data pointed to the risk of an economic slowdown.
West Texas Intermediate fell nearly 4% this week, the most since the week of May 5.
In testimony this week, Fed Chairman Jerome Powell indicated that further monetary tightening is likely in the second half. Data on Friday showed that German economic activity lost much more momentum than expected in June, while the French economy likely contracted in the second quarter. Powell’s comments lifted the greenback, dampening the appeal of commodities priced in the US currency.
“Fear of higher rates and the associated slowdown in economic activity is putting pressure on the oil patch,” said Robert Yawger, director of futures at Mizuho Securities USA. Higher tariffs also increase the cost of transportation, making everything from storing the oil to shipping the oil more expensive, he added.
The pace of oil market moves has also been exacerbated by technical trading in recent days, with both Brent and WTI falling sharply after testing the upper ends of the bands they’ve been stuck in since early May .
Oil is set for a straight quarterly loss as traders worry about demand. The drop has occurred despite production cuts by the Organization of the Petroleum Exporting Countries and its allies. A key indicator of market health, the Brent fast spread, has weakened sharply in recent days, hitting its softest level since January.
Prices:
- WTI for August delivery fell 0.5% to $69.16 a barrel
- Brent for August settlement was down 0.4% at $73.85 a barrel.
- The global crude oil benchmark also lost about 3.5% this week.
