Oil prices head for a weekly loss despite supply fears

Front-month ICE Brent has come up by $2.69/bbl on the day, to $90.94/bbl at 09.00 GMT.

PHOTO: Brent is set for a weekly decline despite supply concerns. Getty Images

Upward pressure:

Supply concerns have driven up crude prices as the Europe-Russia energy standoff intensifies. EU ministers are set to meet in Brussels to discuss the "energy war" as the Kremlin has threatened to cut off its total energy supply to Europe in the event of a price cap. 

Downward pressure:

China's oil demand recovery is being threatened by fresh lockdowns and domestic travel restrictions following renewed Covid-19 outbreaks. Authorities have urged citizens to limit travel during the festive season and local governments were asked to test residents for Covid regularly regardless of their symptoms.

The European Central Bank (ECB) has hiked its key interest rate by 75 basis points, the largest increase in its history. It pledged further increases to rein in spiralling inflation. The ECB also raised the deposit rate from zero to 0.75%, and the refinancing rate to 1.25% - both to their highest levels since the Eurozone crisis in 2011.

ECB President Christine Lagarde stopped short of predicting the block will fall into a recession later this year. A recession would be a “really dark” worst-case scenario. Meanwhile, ING Bank’s chief eurozone economist Carsten Brzeski sees a recession for Europe driven by higher energy prices.

The US Energy Information Administration (EIA) has trimmed its Brent forecast for the fourth quarter of this year, now expecting the key crude futures to average $98/bbl, before coming off slightly to $97/bbl next year under pressure from weaker economic growth and a potential global recession.

By Konica Bhatt

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