Oil futures: Crude prices tumble over 9% on week, Brent around $87/b

18 Nov 2022

Quantum Commodity Intelligence - Crude oil futures Friday were sharply lower, tumbling to fresh two-month lows as demand concerns and the risk-off sentiment took hold.

Front-month January ICE Brent futures were trading at $86.94/b (1810 GMT), compared to Thursday's settle of $89.78/b and around 9% lower on the week. Prices earlier tumbled to a near two-month low of $85.50/b

At the same time, Dec22 NYMEX WTI was trading at $78.83/b, versus Thursday's settle of $81.64/b, around 11% lower from last Friday's settlement. The more-liquid Jan23 contract was trading $79.01/b.

Market structure also came under pressure as the front-month Brent spread narrowed to around $0.40/b, while Dec/Jan WTI flipped into contango.

Focus switched back to demand growth as the week's geopolitical fears eased.  

"There are signs of weakness in the physical oil market despite the looming EU ban on Russian crude oil. Prompt time spreads have also weakened significantly, suggesting that the spot physical market is loosening," said Warren Patterson, head of ING's commodity research.

China is the primary focus on demand growth, as the number of Covid cases continues to grow, although recessionary fears in Europe also weighed on markets.

"Oil prices are getting punished as crude demand concerns show no signs of easing. ​ The world's two largest economies are struggling here as China battles COVID and the US is seeing a significant drop in manufacturing activity. China's new case total rose above 23,000, which is the highest level since April and is approaching its record high," said Ed Moya, senior market analyst at brokerage Oanda.

"Fears are growing that the spread won't ease soon as cases have spread across populous regions of Guangzhou and Chongqing," added Moya

Reports that Chinese refiners have asked Saudi Arabia to cut already nominated December volumes also added to Friday's selloff.

OPEC+ meets in early December and the producer group is expected to take a wait-and-see stance before making any key decisions on quotas. However, analysts said this week's sharp price retreat could mean the producer group will consider further reductions.