Oil fell after four weekly gains as traders weighed prospects for another hike from the Federal Reserve against signs of a tighter market.
West Texas Intermediate dropped below $77 a barrel after closing at a three-month high Friday. That upswing was driven by expectations supply cuts by OPEC+ would reduce inventories, with International Energy Agency Executive Director Fatih Birol saying at the weekend the market could return to a deficit.
US central bank policymakers are widely expected to deliver another interest-rate increase at this week’s meeting in their push to rein in inflation. The aggressive tightening cycle risks tipping the world’s largest economy into recession, potentially harming energy demand.
Oil remains lower this year despite the recent run of gains and production cuts by the Organization of Petroleum Exporting Countries and its allies including Russia. On the demand side, China’s stalled recovery has been a persistent headwind for commodities including crude.
While headline prices eased, there are signs of strength in the market’s underlying structure. The US benchmark’s prompt spread — the difference between WTI’s two nearest contracts — was 30 cents a barrel in backwardation, a bullish pattern that’s at the widest since mid-November on a closing basis.
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Author: Jake Lloyd-Smith
