Oil posts biggest weekly loss since April on demand concerns

Oil posted the biggest weekly decline since early April on growing signs that a global economic slowdown is curbing demand. Prices are near the lowest level in six months.

West Texas Intermediate settled at US$89 a barrel, ending the week nearly 10 per cent lower. US gasoline consumption has dropped, stoking demand concerns, while low liquidity has added to volatility. Supplies from Libya also picked up, helping to shrink key oil futures time-spreads and ease the tightness in the market.   

The pullback is evident across the oil market. Gasoline futures are down 18 per cent this week. Meanwhile, physical oil differentials have narrowed and Brent’s prompt spread -- the difference between its two nearest contracts and a gauge of supply -- shrunk to US$1.73 a barrel in backwardation, down from more than US$6 a week ago.

“Crude broke several technical levels in a week that has been a bloodbath for super-cycle believers,” said Rebecca Babin, a senior energy trader at CIBC Private Wealth Management. “The action, however, indicates that this was more of a buyers’ strike than meaningful position reduction, as buyers are content to sit on the sidelines until the broader narrative around demand improves.”