Oil prices recorded a weekly loss of about 5%, influenced by expectations of weak global economic growth, interest rate hikes, and COVID-19 restrictions in China that negatively impacted demand, despite the European Union considering a ban on Russian oil imports. The International Monetary Fund downgraded its forecasts for global economic growth this week, while U.S. Federal Reserve Chairman Jerome Powell stated yesterday that a half-point increase in interest rates will be a possibility at the next bank meeting in May.
OANDA analyst Jeffrey Halley commented, "At this stage, concerns about growth in China and monetary tightening from the central bank that limits U.S. growth seem to balance the impact of worries that Europe will soon expand its sanctions on Russian energy imports." Expectations regarding demand from China, the world's largest oil importer, continued to pressure the market. Shanghai announced new measures to combat COVID-19, including daily testing starting today, to curb the latest outbreak of the disease in the country.
Brent reached $139 per barrel last month, the highest level since 2008, but both benchmark crudes recorded weekly losses of about 5% each. Baker Hughes, an energy services company, reported today that the number of oil rigs, an early indicator of future production, increased by one to 549 for the week ending April 22, marking its highest level since April 2020. Current price support comes from supply shortages following production disruptions in Libya, which has seen a decline of 550,000 barrels per day. Supplies could shrink further if the European Union imposes a ban on Russian oil.
The Netherlands announced yesterday that it intends to stop using Russian fossil fuels by the end of the year. Morgan Stanley raised its third-quarter Brent crude price forecast by $10 per barrel to $130, attributing it to a "larger deficit" this year due to decreased supply from Russia and Iran, which is likely to outweigh the impact of a short-term decline in demand.
