MELBOURNE, Nov 18 (Reuters) – Oil pared early gains and was on track for a steep weekly decline on concerns about weakening demand in China and further interest rate rises by the US Federal Reserve.
Brent crude futures had edged lower by 13 cents or 0.1% to USD89.65 a barrel by 0737 GMT, and were not far off four-week lows of USD89.53 hit in the previous session.
US West Texas Intermediate (WTI) crude futures rose 13 cents, or 0.2%, to USD81.77 a barrel, but held near a six-week low. WTI is down 8% so far this week, while Brent is down more than 6%.
The dollar index inched lower on Friday, making oil cheaper for buyers holding other currencies.
“I hate using the lame short-covering mantra, but there is little other than the slightly weaker greenback to trigger a bid under oil so far,” said Stephen Innes, managing partner at SPI Asset Management.
Analysts said concerns about potential lockdowns in China to curb a surge in COVID cases, which hit their highest level since April, and worries that more interest rate hikes will drive the US economy into recession cast a pall over the market.
from US Federal Reserve officials this week and stronger-than-expected have dashed some hopes for the moderation of aggressive interest rate hikes in the United States.
The Fed is expected to raise rates by a smaller 50 basis points in December after four consecutive 75 bp hikes, according to.
“In the near term sentiment is likely to remain negative given the deteriorating macro picture and signs of physical weakness,” said Warren Patterson, head of commodities strategy at ING.
China, the world’s biggest oil importer, reported 25,353 new COVID-19on Nov. 17 up from 23,276 new cases a day earlier, the National Health Commission said on Friday.
“The policy settings in the city of Guangzhou in southern China, where COVID‑19 cases have surged significantly, will be important to watch,” Commonwealth Bank commodities analyst Vivek Dhar said in a note., a key manufacturing hub in China, is home to 19 million people.
Recession concerns have dominated this week even with the European Union’s ban on Russian crude looming on Dec. 5 and the Organization of the Petroleum Exporting Countries and allies, together known as OPEC+, tightening supply.
The premium for front-month WTI futures over barrels loading in six months was pegged at USD2.42 a barrel, the lowest level in three months, indicating less worry about future supply.
(Reporting by Sonali Paul in Melbourne and Muyu Xu in Singapore; Editing by Ana Nicolaci da Costa and Bradley Perrett)
This article originally appeared on reuters.com