Oil stabilizes but remains on track for a weekly decline

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LONDON — Oil prices were broadly flat on Friday, but on track for a weekly decline on fears of sharp interest rate hikes that are expected to dampen global economic growth and fuel demand.

Brent crude futures were up 25 cents, or 0.3%, at $91.09 a barrel at 0921 GMT, but were down 1.9% for the week.

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U.S. West Texas Intermediate (WTI) crude futures gained 11 cents, or 0.1%, to trade at $85.21, down 1.8% this week.

Both benchmarks are heading for third consecutive weekly losses, partly hurt by a strong US dollar, which makes oil more expensive for buyers using other currencies. The dollar index held near last week’s high above 110.

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In the third quarter so far, Brent and WTI are down 20% for the worst quarterly percentage declines since the onset of the coronavirus pandemic in the first three months of 2020.

Investors are bracing for a hike in U.S. interest rates, with the market also rattled by the International Energy Agency’s outlook for near-zero growth in oil demand in the fourth quarter due to a prospect of weaker demand in China.

“The IMF and the World Bank have warned that the global economy could tip into recession next year. This is bad news for the demand side of the oil coin and comes a day after the IEA forecast (on) oil demand,” said PVM analyst Stephen Brennock.

« Recession fears coupled with higher interest rate expectations in the United States have created a powerful bearish cocktail. »

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Other analysts said sentiment was hurt by comments from the US Department of Energy that it was unlikely to seek to fill the strategic oil reserve before fiscal 2023.

On the supply side, the market found some support in waning expectations of a return of Iranian crude as Western officials downplayed prospects of a renewed nuclear deal with Tehran.

Oil prices could also be supported in the fourth quarter by possible OPEC+ production cuts, which will be discussed at the group’s meeting in October, as Europe faces an energy crisis fueled by uncertainty over Russia’s oil and gas supply.

(Reporting by Shadia Nasralla Additional reporting by Sonali Paul in Melbourne and Emily Chow in Singapore Editing by David Goodman)