Oil Suffers Deep Weekly Loss as Concerns Over Demand Intensify

(Bloomberg) -- Oil headed for a punishing weekly loss on increasing evidence that a global economic slowdown is spurring demand destruction, with prices collapsing to the lowest level in six months as key time spreads contract.

West Texas Intermediate traded above $89 a barrel in Asia, with the US benchmark down more than 9% this week. Official data showed US gasoline consumption has softened while crude stockpiles rose. The slump came even as Saudi Arabia has boosted prices, and OPEC+ warned of scant spare capacity.

While oil markets remain in backwardation, a bullish pricing pattern, widely watched differentials have narrowed sharply, signaling an easing of tightness. Brent’s prompt spread -- the gap between its two nearest contracts -- was $1.62 a barrel in backwardation, down from more than $6 a week ago.

After surging in the first five months of the year crude’s rally has been thrown into reverse, with losses deepening this month after falls in June and July. The sell-off, which has wiped out gains triggered by Russia’s invasion of Ukraine, will ease the inflationary pressures coursing through the global economy that have spurred central banks including the Federal Reserve to hike rates.