OIL prices settled more than 1 per cent lower on Friday (May 12), falling for the third consecutive week, as the market balanced supply fears against renewed economic concerns in the United States and China.

Brent crude futures settled down 81 US cents, or 1.1 per cent, to US$74.17 while West Texas Intermediate (WTI) US crude futures fell 83 US cents, or 1.2 per cent, to US$70.04.

Both benchmarks settled about 1.5 per cent lower week on week.

The US dollar clung to modest gains against the euro on Friday and was headed for its biggest weekly gain since February, as uncertainty around the US debt ceiling and monetary policy prompted a shift to safe havens.

A stronger greenback makes dollar-priced oil more expensive for holders of other currencies.

“Lack of confidence in the economy is translating to a retreat to the safer dollar, and is also causing pessimism about oil demand,” said John Kilduff, partner at Again Capital in New York.

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Concern mounted that the United States – the world’s biggest oil consumer – will enter recession, with talks over the US government’s debt ceiling postponed and concern growing over another crisis-hit regional bank.

The US Federal Reserve will probably need to raise interest rates further if inflation stays high, Fed governor Michelle Bowman said on Friday, adding that data this month has not convinced her that price pressures are receding.

Meanwhile, China’s April consumer price data rose at a slower pace than in March, missing expectations, while deepening factory gate deflation refocused doubts about its recovery from Covid restrictions driving oil demand growth.

The US oil and natural gas rig count fell this week to its lowest in nearly a year, as gas rigs slumped by the most in a week since February 2016, energy services firm Baker Hughes said in its closely followed report on Friday.

US oil rigs fell by two to 586 this week, their lowest since June 2022, while gas rigs plunged by 16 to 141, their lowest April last year.

The market drew some support from the forecast emerging supply deficit for the second half of the year, even as Iraq’s oil minister Hayan Abdel-Ghani told Reuters on Friday he does not expect Opec+ to decide on further production cuts when it next meets in Vienna on Jun 4.

An Opec report on Thursday said the producer group expects July-December demand for its own crude to be 90,000 barrels per day (bpd) higher than previously projected.

The Organization of the Petroleum Exporting Countries (Opec) kept its global oil demand forecast for 2023 unchanged on Thursday, expecting economic risks to be offset by higher Chinese demand growth.

The market also drew support after US energy secretary Jennifer Granholm signalled that the country could repurchase oil for the Strategic Petroleum Reserve (SPR) after completing a congressionally mandated sale next month. REUTERS