Oil futures settled lower Friday as worries over the economic outlook pulled prices for U.S. and global benchmark crude down for a fourth week in a row.
Oil found some early support after U.S. Energy Secretary Jennifer Granholm on Thursday afternoon said the Energy Department would aim to purchase crude to help rebuild stocks in the Strategic Petroleum Reserve next month.
The announcement "does not commit to any price level but rather states that they are still thinking about a repurchase," StoneX's Kansas City energy team, led by Alex Hodes, wrote in Friday's newsletter. "This could artificially provide a floor to the oil market in the near term if the market believes the possibility of repurchases is authentic."
However, ongoing troubles for U.S. regional banks and a political showdown over the U.S. government's debt ceiling have amplified worries that aggressive monetary tightening by the Federal Reserve and other major central banks could lead to a sharp economic downturn or recession later this year.
See: Debt-ceiling meetings 'productive' as Biden, leaders set to reconvene next week: White House
Asian economic growth has also been a key concern, said Stewart Glickman, deputy research director at CFRA Research. "What if the China reopening trade is sluggish? If China doesn't add meaningfully to incremental demand growth, who else steps up?"
Against that backdrop, WTI and Brent futures on Friday finished lower.
"The selloff in the market has been unrelenting over recent weeks, with negative sentiment rising following concerns over the macro environment and what it could eventually mean for oil demand," said Warren Patterson, head of commodities strategy at ING, in a note.
"Weaker refinery margins have also raised doubts over the strength of oil demand," Patterson wrote. "Part of the weakness in margins is also driven by supply dynamics, with Russian refined product flows holding up well, whilst in Asia, Chinese refined exports remain strong."
Crude has stumbled even as additional production cuts of around 1.15 million barrels a day by Saudi Arabia and its OPEC+ allies took effect at the beginning of the month. Meanwhile, news reports have noted doubts that Russia is following through on its pledge to curb output by 500,000 barrels a day through year-end.
Glickman, however, said the supply picture seems less bearish. "OPEC+ has shown a willingness to be agile and impose unexpected production cuts," he said. Sanctions and price caps on Russian barrels mean President Vladimir Putin is not interested in boosting production either, he said.
"If we resolve the debt ceiling crisis, see more activity out of China and get a better inflation read, I suspect oil moves higher," said Glickman.
Also see: EIA forecasts second-highest U.S. summer power demand on record for natural gas