(Bloomberg) -- Oil headed for a third weekly drop, its longest losing run this year, on concern that a potential recession will cut into energy demand.
West Texas Intermediate edged above $106 a barrel after tumbling on Thursday as commodities were pummeled. The US benchmark has shed about 1% this week despite signs that the physical crude market remains very tight.
Data this week showed weakness in US consumer spending, which is by far the biggest contributor to gross domestic product. That follows a pivot by the Federal Reserve earlier this year to aggressively tighten monetary policy to quell raging inflation.
Oil fell about 8% in June as investors fretted over a potential global slowdown, eroding a rally spurred by the war in Ukraine, interruptions to supplies and rising demand. The jump in prices alarmed President Joe Biden, who’s spearheading efforts to get producers in the Middle East to boost crude output.
The Organization of Petroleum Exporting Countries and its allies ratified an oil-production increase this week, completing the return of supplies halted during the pandemic. Biden will travel to the Middle East later this month to urge Saudi Arabia and the United Arab Emirates to increase supplies further.
In a sign that US demand remains robust for now a record number of drivers are expected to hit the road this weekend for Independence Day travel. Average retail gasoline prices have eased slightly in recent weeks after hitting a record above $5 a gallon in June.
Oil’s time spreads, which traders track for indications on the strength of demand, continue to flash positive signals. Brent’s prompt spread -- the difference between its two nearest contracts -- was $3.48 a barrel in backwardation, up from $2.73 a month ago.
©2022 Bloomberg L.P.
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