Oil Prices Fall, With A Weekly Loss of Roughly 5% Due to Growth Fears

Brent oil finished at $106.65 a barrel, down $1.68, or 1.6 percent. West Texas Intermediate (WTI) crude oil in the United States fell $1.72, or 1.7 percent, to $102.07.

Brent crude reached a record high of $139 a barrel last month, the highest price since 2008, but both oil benchmarks fell roughly 5% this week on supply worries.

The International Monetary Fund, which dropped its global economic growth prediction for 2022 this week, may lower it further if Western nations tighten sanctions against Russia for its conflict in Ukraine and energy costs continue to climb, the agency's second-ranking official warned.

Germany's government will lower its growth forecast for 2022 to 2.2 percent from 3.6 percent, a government source said, while Chinese demand for gasoline, diesel, and aviation fuel is expected to fall 20% year on year in April, Bloomberg reported, as many of China's largest cities, including Shanghai, are under COVID lockdown.

Federal Reserve Chairman Jerome Powell indicated Thursday that a half-point hike in US interest rates "will be on the table" at the Fed's May policy meeting, sending the dollar to a more than two-year high. A higher dollar increases the price of oil and other commodities for individuals who hold foreign currencies.

"At the moment, worries about China's growth and the Fed's tightening, which is stifling US growth, seem to be outweighing fears that Europe would soon expand sanctions on Russian energy imports," said Jeffrey Halley, an analyst at brokerage OANDA.

Reuters estimates and US Commodity Futures Trading Commission data published on Friday show that speculators' net long bets on the US dollar decreased for a third consecutive week.

TIGHTNESS OF SUPPLY

On the supply side, reports indicated that the Russia-Kazakh Caspian Pipeline Consortium (CPC) is likely to restart full shipments on April 22 after almost 30 days of outages.

According to a Baker Hughes Co study, the US oil rig count increased by one to 549 this week, the highest level since April 2020.

Nonetheless, supply constraints supported prices as Libya lost 550,000 barrels per day (bpd) of production due to interruptions. Supply might be further constrained if the EU puts an oil embargo on Russia.

This week, an EU source told Reuters that the European Commission is seeking to accelerate the availability of other energy sources, while a senior White House advisor expressed confidence in Europe's determination to shut down or further limit remaining Russian oil and gas shipments.

By the end of this year, the Netherlands intends to phase out Russian fossil fuels.

Morgan Stanley (NYSE:MS) increased its third-quarter Brent pricing projection by $10 per barrel to $130, noting a "larger gap" this year owing to decreasing Russian and Iranian production, which is anticipated to offset short-term demand challenges.

European refiners processed 9.04 million barrels per day of crude in March, down 4% from the previous month but up 4.8 percent year over year, Euroilstock statistics showed.

For the week ending April 22, US oil refiners are likely to shut down around 1.08 million barrels per day of capacity, boosting available refining capacity by 47,000 barrels per day, according to research firm IIR Energy.

"While we may decline, there is a point at which we will find support because the fundamentals are just too tight for things to go much further," said Robert Yawger, Mizuho's executive director of energy futures.