Oil hit a three-week low as light summer trading left the commodity at the mercy of broader markets.

West Texas Intermediate Futures are down 4.6 per cent this week, on pace to snap a seven-week streak of gains. Equities, rattled by China’s stock market woes, dragged oil lower, while signs that further interest rate hikes are likely didn’t boost confidence in demand. Even a steep decline in U.S. crude stockpiles and signs of tightening supplies in the Middle East and North Sea failed to lift prices.

“Crude prices are heavy as Wall Street grows nervous with the outlooks for the world’s two largest economies — the U.S. and China,” said Ed Moya, senior market analyst at Oanda. “More traders are realizing that U.S. soft-landing prospects might not be a good thing for conquering inflation.”

Before this week’s retreat, oil had surged for more than a month on supply cuts from OPEC+ linchpins Saudi Arabia and Russia, as well as estimates that worldwide crude consumption is running at a record pace. While timespreads have narrowed in tandem with crude benchmarks, they remain backwardated, implying near-term supply tightness.

Reflecting that underlying positivity, UBS Group AG raised its forecast for Brent prices at the end of the year by US$5 to $95 a barrel.

Prices:

• WTI for September delivery fell $1.61 to settle at $79.38 a barrel in New York.
• Brent for October settlement slid $1.44 to $83.45 a barrel.