Oil: Week of recession worries with losses over 3.4%

Oil prices closed higher for the second consecutive session, but the “black gold” recorded significant losses during the week amid concerns about an impending economic recession – due to restrictive monetary policies – which will hit demand in the coming months.

Despite the recovery in oil prices on Thursday and Friday, which allowed US crude to recover some of the slide that sent it into bear market territory in the middle of the week, “markets are increasingly concerned about the risk of a recession and a dip in demand , a condition that put the brakes on the oil rally,” said Michael Hewson, an analyst at CMC Markets in London.

Growing fears of a recession in the US and the global economy weighed on prices, pushing crude even below $100 a barrel, only to return above that psychological level on Thursday.

Oil’s gains today came in the wake of a stronger-than-expected US jobs report that eased concerns about a potential recession hitting energy demand. The U.S. economy added 372,000 new jobs in June, beating the estimate of 250,000 jobs among economists polled by the Wall Street Journal, according to data released.

“Oil has been the best-performing asset since the start of the year, and we expect prices to stabilize or even climb higher going forward,” Tariq Zahir, CEO of Tyche Capital Advisors, told MarketWatch.

“The summer season increases demand for oil and gasoline, while the Atlantic hurricane season, which runs from June 1 to November 30, can threaten energy activities in the Gulf of Mexico,” he said.

Data from the Energy Information Administration on Thursday showed a big increase in crude inventories on the week, but oil prices managed to close the day with gains that extended today, Zahir noted.

Meanwhile, Michael Tran, an analyst at RBC Capital Markets, stressed in a note that concerns about a possible recession should be respected. In a recessionary scenario, where demand suffers, “we could see spot prices drop to $70/barrel even within the second half of 2022,” he said.

In this climate, the slow press West Texas Intermediate U.S. crude for August delivery rose $2.06, or 2%, to settle at $104.79 a barrel on the New York Mercantile Exchange on Friday. In weekhowever, WTI recorded significant losses of 3.4%.

The type oil Brent U.S. crude for September delivery gained $2.37, or 2.3%, to $107.02 a barrel on Friday, but in weekly basis closed with a “plunge” of 4.1%.