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Commodity Market: WTI Crude Oil heads for weekly loss on global recession fears, weak China oil demand

Futures on US West Texas Intermediate Crude Oil were on track to register their first loss in three weeks, as global recession concerns and weak Chinese oil demand offset the positive effects from a softer US Dollar and a huge cut to the OPEC+ oil production target.

Yesterday the International Energy Agency (IEA) revised down its oil demand forecast for 2022 and 2023 and warned a decision by OPEC+ members to slash oil supply could tip global economy into recession.

“The relentless deterioration of the economy and higher prices sparked by an OPEC+ plan to cut supply are slowing world oil demand,” the IEA said in its monthly oil report.

“With unrelenting inflationary pressures and interest rate hikes taking their toll, higher oil prices may prove the tipping point for a global economy already on the brink of recession,” the Paris-based agency added.

Last week, the OPEC+ group cut oil production targets by 2 million barrels per day, while the decision resulted in clashes between Saudi Arabia and the United States.

US President Joe Biden warned of unspecified “consequences” for relations with Saudi Arabia, while Riyadh said the decision was not of a political nature and was rather meant to balance the market and curb volatility.

According to IEA estimates, underproduction among OPEC+ members will probably translate to a 1 million barrel per day reduction.

Meanwhile, China, the biggest crude oil importer globally, has been struggling to contain COVID-19 flare-ups following a week-long holiday ahead of a Communist Party Congress.

The country strictly adheres to a zero-COVID policy, which is affecting heavily economic activity.

As of 10:27 GMT on Friday WTI Crude Oil Futures were losing 0.86% to trade at $88.34 per barrel. Earlier this week, the black liquid went up as high as $93.64 per barrel, which has been its strongest price level since August 30th ($97.66 per barrel).

WTI Crude Oil Futures for delivery in November were set to register a 4.67% drop for the week, following two consecutive weeks of gains.

At the same time, Brent Oil Futures were losing 0.80% on the day to trade at $93.81 per barrel. Earlier this week, Brent Oil went up as high as $98.75 per barrel, which has been its strongest price level since August 31st ($100.46 per barrel).

Brent Oil Futures for delivery in December were set to register a 4.08% loss for the week, following two consecutive weeks of gains.

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