Investing.com -- At the risk of reiterating, the message to the Saudis and the rest of OPEC+ is the same: More patience is needed with oil prices.
Crude markets posted a weekly loss of about 4% after sliding for a fourth time in five days as recession fears triggered by aggressive rate hikes by leading central banks usurped typical optimism at this time of the year from summer travel.
New York-traded West Texas Intermediate, or WTI, crude settled down 35 cents, or 0.5%, at $69.16 per barrel. Earlier in the session, WTI plunged to a 3-week low of $67.36. For the current week itself, it showed a loss of 3.7%. The U.S. crude benchmark has had a volatile month, finishing last week up 2.3% after a net 3.5% tumble over two prior weeks.
London-traded Brent crude was down 29 cents, or 0.4%, at $73.85, versus a three-week low at $72.12. Like WTI, it was off about 4% for the current week. The global crude benchmark has also had a rocky June, finishing last week up 2.4%, after a net slump of nearly 2% over two previous weeks.
Recession fears ratcheted by rate hikes, weak PMIs
Recession concerns reached new highs after the Bank of England raised interest rates by half a percentage point — twice more than forecast — saying it needed to act against "significant" indicators that British inflation would take longer to fall. U.K.’s main interest rate is now at 5%, the highest since 2008 after the largest rate increase since February.
The U.K. central bank has raised rates for 13 consecutive times to trail just behind the Federal Reserve, which has brought U.S. rates to a peak of 5.25% with 10 straight rounds of tightening. The Fed itself indicates that it wants to raise rates at least twice more before the year ends.
Adding to recession concerns on Friday were business surveys by S&P Global which showed Germany’s economic activity lost much more momentum than anticipated in June, driven by a slowdown in services and sustained weakness at the country’s factories. Separate data for France showed its economy probably slumped in the three months through June.
In the U.S. itself, the S&P Services PMI flash for June came in at 54.1 versus a projected reading of 54 and a previous print of 54.9.
“Energy traders are worried that the Fed and friends might cripple economic growth in the second half of the year,” said Ed Moya, analyst at online trading platform OANDA.
“Next week, the heads of the major central banks will gather in Portugal and likely signal a commitment to tackle inflation with aggressive rate hikes,” said Moya, adding that more pessimism was likely from a global outlook due from the Energy Institute and a meeting of the World Economic Forum that will focus on energy transition from fossil fuels.
Saudi target of $80 a barrel remains just that, a target
The Saudis’ aim of bringing oil to above $80 or keeping a barrel at least in the high $70s has proved a greater challenge than thought despite the advent of summer travel, which typically results in peak demand for crude and higher prices.
The kingdom, which leads the 23-nation alliance of oil producers called OPEC+, has announced three production cuts since October that would theoretically remove 2.5 million barrels per day from its production, and bring output to 9M barrels daily by July. Crude prices have only managed to rally briefly after each announcement.