Ending a seven-week winning streak as fears of a Chinese economic slowdown and rising U.S. interest rates clouded the outlook for demand.
Crude prices saw some strength on Thursday, rising about $1 from a two-week low after China’s central bank said it will keep markets flush with liquidity to help shore up economic growth.
This notion helped prices see some gains on Friday, with markets now awaiting more stimulus measures from China in the coming days, as a post-COVID economic recovery in the country ran out of steam.
An easing dollar, which retreated from two-month highs, also offered some relief to oil prices on Friday.
Oil prices had rallied for the past seven weeks after extended supply cuts by major producers Saudi Arabia and Russia pointed to tighter supplies in the remainder of the year.
Markets are now awaiting more stimulus measures from China, as the country grapples with a slowing post-COVID economic recovery.
The People’s Bank of China had unexpectedly cut short and medium-term lending rates earlier this week, and is now likely to cut its benchmark loan prime rate next week to unlock more liquidity.
Investors are calling on more targeted, fiscal measures to support the economy, particularly China’s beleaguered property sector. The sector accounts for a fourth of the Chinese economy, and is facing a default risk from one of its biggest players - Country Garden Holdings.
But analysts questioned whether the government will increase fiscal spending to support the economy, with Fitch Ratings saying that such a scenario appeared unlikely.
While the dollar fell slightly on Friday, it was still sitting on strong gains for the week. Strength in the greenback also weighed on oil prices, given that it makes crude more expensive for international buyers.
Hawkish signals from the minutes of the Fed’s July meeting and signs of continued strength in the labour market raised concerns that the bank could keep hiking interest rates, or keep them higher for longer.
While U.S. oil demand has remained stable over the past few months, markets feared a potential decline in fuel consumption, especially as the end of the summer season approaches.
Fuel card users can expect prices to remain in line with last week whilst pump prices continue to hedge higher as they play catch-up to the recent upward movement in the wholesale fuel market.
