Oil set for first quarterly drop since 2020 as macro mood sours

Oil headed for its first quarterly loss in more than two years as escalating fears over a global economic slowdown and a stronger dollar overshadowed the prospects for tightening supply.

West Texas Intermediate swung between gains and losses near US$81 a barrel on Friday but prices are down 23 per cent this quarter. Crude has been roiled by the surge in the dollar to a record over recent weeks, as aggressive central bank rate hikes darken the outlook for global growth. 

Traders are also grappling with the looming risk of reduced supplies. The Organization of Petroleum Exporting Countries and its allies is set to meet next week, and are already discussing plans for an output cut. Analysts from RBC Capital Markets to JPMorgan Chase & Co. have said the producer group could pull anywhere between 500,000 to 1 million barrels a day of supply. 

“The risk to supply continues to be a supporting theme,” said Ole Hansen, head of commodities strategy at Saxo Bank, referring to possible OPEC+ cuts. “The market remains troubled by forces pulling in opposite directions.”