Early in the last trading cycle for spot physical barrels, Asian buyers scooped up a massive amount of inexpensive US oil, increasing the potential of lower demand for Middle Eastern crude.
On Friday, oil prices fell by approximately 2% on anticipation that supply interruptions in the United States’ Gulf of Mexico would be temporary, while recession worries clouded the demand forecast.
Futures, on the other hand, were still on course for a weekly gain.
Brent crude futures slid $1.45, or 1.5%, to $98.15 a barrel, while WTI crude in the United States sank $2.25, or 2.4%, to $92.09 a barrel. On Thursday, both contracts increased by more than 2%.
“We’re coming back a little bit after the huge run up yesterday,” said Price Futures Group analyst Phil Flynn. Brent recovered 3.4% this week after losing 14% the previous week on concerns that increasing inflation and interest rates will harm economic growth and gasoline consumption.
Despite futures and time spreads expressing fears about an economic downturn, Saudi Arabia expressed confidence in the demand picture earlier this month when it hiked its oil pricing for Asia to a record. However, in order to compete against arbitrage flows into the area, such as those from the US, the monarchy priced part of its oil at lower-than-expected values.
According to dealers that buy and sell those cargoes, offers for West Texas Intermediate Midland, a key US export grade to Asia, are less than a $8 per barrel premium to the Dubai benchmark for barrels slated to arrive in November. When freight and logistics are factored in, this is less expensive than similar Murban crude, the UAE’s premier grade.
An surge in Libyan output and an unusual drop in US gasoline consumption during the peak driving season have added to the Atlantic Basin’s plenty and pushed on pricing. According to Bloomberg statistics, WTI fell to a remarkable discount to Dubai crude last week. Oman’s premium to Dubai swaps, a crucial demand indicator for Middle Eastern oil, has also shrunk to its smallest since June.
There are still some concerns about the forecast, particularly after profit margins for producing fuels such as gasoline recently fell, prompting refiners to contemplate cutting operating rates. Following the margin drop, traders predict that overall demand for spot cargoes would be lower than in the previous two months.
Crude prices fell more than $1 to $98.26 on Friday after the Organization of the Petroleum Exporting Countries (OPEC) lowered its prediction for global oil demand growth in 2022 by 260,000 barrels per day (bpd).
The Abu Dhabi index (.FTFADGI) fell 0.6%, halting a 5-day winning run, as conglomerate International Holding Company (IHC.AD) fell 1.4% and Emirate’s top lender First Abu Dhabi Bank (FAB.AD) down 0.8%.
Julphar (JULPHAR.AD) fell 3.7% after the Gulf pharma firm’s second-quarter net earnings fell more than 90% to 4.8 million dirham ($1.31 million).
According to Refinitiv statistics, the Abu Dhabi index gained 3.3% in a week.