Gloomy outlook for the economy drags oil down

Brent fell back below the $80 threshold, down 2.67%, and WTI fell 2.39% to $74.29.

Oil prices fell on Friday, weighed down by central bank rate hikes this week which reignited fears of a global recession.

The barrel of Brent from the North Sea for delivery in February fell 2.67% to 79.04 dollars.

Its American equivalent, a barrel of West Texas Intermediate (WTI), for delivery in January, lost 2.39% to 74.29 dollars.

Monetary policy meetings at the Federal Reserve (Fed) on Wednesday and the Bank of England (BOE) and then the European Central Bank (ECB) on Thursday generated an atmosphere of risk aversion, DNB analysts noted. .

The main central banks have all three decided to raise their key rates by 0.50 percentage points.

The ECB particularly insisted on its determination to continue its substantial rate hikes to combat desperately high inflation.

These “warnings have revived fears regarding economic growth, dampening oil demand expectations,” said Stephen Brennock, analyst at PVM Energy.

At the same time, Thursday’s announcement of the partial reopening of the Keystone pipeline following nearly a week of shutdown following a leak in Kansas, reinforced the downward trend in crude prices.

Keystone usually transports around 600,000 barrels per day from Canada to the United States. In addition, crude inventories in the United States have surprisingly accumulated this week.

“Between Keystone, the large oil stocks, the drop in retail sales in the United States, the negative news accumulates and sometimes takes several days to be digested” by investors, indicated James Williams of WTRG Economics to explain the decline in prices.

“I believe there is another factor which is not yet in play but which is looming, and that is the contagion of Covid-19 in China”, added the analyst.

While health restriction measures have been relaxed by Beijing, the disease “might spread quickly and have a negative impact on the economy and demand for China”, the world’s largest importer of crude, fears James Williams.

The outbreak is spreading rapidly across China, a week following the majority of health restrictions in place for nearly three years were lifted. Authorities have admitted that it is now “impossible” for them to tally the number of cases.