Oil Slumps for a Third Week as Recession Fears Rattle Market

An oil pump jack in Midland, Texas, US, on Thursday, March 2, 2023. Thousands of miles away from the turmoil on Wall Street, Midland, Texas that ranked No.1 in the US for inflation just over a year ago has since ceded that title – only to lay claim to a different one: the country’s pay-raise capital. Photographer: Sergio Flores/Bloomberg

(Bloomberg) -- Oil fell for the third straight week as concerns about softening demand were exacerbated by low trading volumes.

West Texas Intermediate settled above $71 a barrel on Friday after trading in a $13 range this week amid renewed instability among regional US lenders and fears the economy is headed into a recession. The string of weekly declines is the longest this year.

Signs of strength in the physical oil market suggest the selloff — which included a brief, dramatic plunge to the lowest intraday level since 2021 — may have been excessive. Shell Plc Chief Executive Officer Wael Sawan said on Thursday that the market was actually “pretty tight.”

“There is good reason to be bullish — the trouble is that oil traders are a fickle bunch,” said Stephen Brennock, an analyst at PVM Oil Associates Ltd. “It will only be a matter of time before OPEC production cuts, lackluster supply from non-OPEC+ and the constructive demand picture in China take center stage once more.”

Oil prices have dropped about 11% this year, showing that a plan by the Organization of Petroleum Exporting Countries and its allies to regain control of the market by cutting output starting this month isn't yet working. The losses have been driven by concerns that global growth is slowing, potentially hurting energy demand.

In the Middle East, Iraq said it has yet to strike a deal with Turkey that would allow for the resumption of almost half a million barrels a day of Iraqi oil exports through the country. The standoff between Baghdad and the Kurdistan Regional Government has halted shipments from the port of Ceyhan since late March.

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