(Bloomberg) — Oil eased at the start of the week, with investors weighing concerns that a global slowdown will drag down demand against supply interruptions and signs of persistent market tightness.
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West Texas Intermediate declined below $108 a barrel after jumping 2.5% on Friday to cap a weekly gain. Trading volumes will likely be weaker than usual on Monday with a holiday in the US for the Fourth of July break.
Crude was buffeted last month as signs of an impending US recession prompted a wave of selling in commodities. Still, supply outages, including in Libya, have offset some of the weakness. Key time spreads also show a robust market.
Oil remains more than 40% higher this year after being boosted by the war in Ukraine, which triggered a wave of sanctions on Russian flows. Many product prices remain elevated and Vitol Group, the biggest independent oil trader, warned at the weekend that surging fuel costs are starting to hurt demand.
Traders are also tracking China’s slow emergence from a string of demand-sapping anti-coronavirus lockdowns in major cities, as well as signs that officials have yet to quell outbreaks in the country entirely. A total of 385 local cases were reported on Saturday, with hundreds detected in Anhui province.
Lofty gasoline prices are a challenge for US President Joe Biden, who has tapped strategic reserves and pushed Middle Eastern suppliers to raise output to bring them down. In a tweet, Biden urged companies running gas stations to lower prices. The post was criticized by Amazon.com Inc. founder Jeff Bezos.
Oil markets remain in backwardation, a bullish pattern that’s marked by near-term prices commanding a premium to longer-dated ones. Brent’s prompt spread — the difference between its two nearest contracts — was $3.78 a barrel in backwardation, more than $1 higher than a month ago.
Concerns about a potential US recession — which would threaten oil demand — have escalated as the Federal Reserve hikes interest rates at a rapid clip to combat the fastest inflation in decades. Minutes from the central bank’s June meeting are due to be published on Wednesday.
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