Oil Heads for Weekly Loss as China Concerns and Rate Angst Flare
(Bloomberg) -- Oil headed for its first weekly loss since June as concerns over economic weakness in China and potentially even tighter monetary policy in the US combined to overshadow signs of a solid physical market.
West Texas Intermediate traded above $80 a barrel, set for a drop of about 3% this week as a stream of poor economic data from China has weighed on risk assets including oil. That has eclipsed signs of a tighter crude market, with US stockpiles declining to the lowest level since January.

In the US, Federal Reserve policymakers have signaled they may not be done hiking rates to tame inflation, helping to lift Treasury yields and aiding the dollar. The US currency is on course for a fifth weekly gain, the longest run in more than a year, which dulls the allure of commodities for overseas buyers.
Crude remains markedly higher from its lows in June, driven largely by supply cuts by OPEC+ linchpins Saudi Arabia and Russia. That’s led many observers, including the International Energy Agency, to forecast tighter balances and higher prices before the year is out. Nevertheless, Citigroup Inc. has countered that oil will weaken as consumption disappoints and supply swells.
Commodities including oil are “licking their wounds from a conspiracy of higher yields, stronger US dollar, and risk-off” sentiment, said Vishnu Varathan, Asia head of economics and strategy at Mizuho Bank Ltd. China’s underwhelming data is “cold comfort for commodities,” he said.
Still, timespreads continue to signal underlying strength even as futures have softened. The front-month spread for WTI was 60 cents a barrel in a bullish, backwardated structure, little changed over the week, and up from 9 cents a barrel in backwardation a month ago.
©2023 Bloomberg L.P.
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