Oil down 5% on week as U.S. rate hike fears, job cuts defy OPEC+ By Investing.com

By Barani Krishnan

Investing.com — U.S. rate hike and recession fears have cut into the OPEC+-hyped rally in crude, handing oil bulls their first week of losses after a four-week winning streak.

New York-traded West Texas Intermediate, or , was up 60 cents, or 0.8%, to $77.97  a barrel by 12:27 ET (16:27 GMT). For the week, WTI was down 5.4%, snapping a four-week rally heightened by this month’s production maneuver by OPEC+ that had brought a net gain of 24%.

London-traded , the global benchmark for crude, was also up 60 cents, or 0.7%, to $81.70. For the week, Brent was also down 5.4% after a four-week rally that had contributed a cumulative gain of 18%.

The dollar’s rebound earlier this week from the one-year lows hit last week was the catalyst to the change in the fortunes of those long oil.  A higher weighs on overseas demand for commodities priced in the currency. Higher sap the appeal of risk-heavy assets, while also limiting flows of foreign capital.

Then news of job layoffs by major corporations operating in the United States reinforced fears of business slowdowns and an impending recession. 

Bank of America (NYSE:) said it intended to retrench 4,000 workers by June despite a sterling first quarter. Big Four accounting firms announced their own layoffs, with Ernst & Young saying it will shed 5% of its U.S. workforce while Deloitte said it will cut 1.5%.

On the media front, Buzzfeed said the online publication would be shut down while Insider Inc — formerly known as Business Insider — announced it would begin cutting an estimated 10% of its staff in an effort to stay “healthy and competitive”.

Riding over those job cuts were worries that the Federal Reserve will agree on another at its May 3rd rate decision which will bring U.S. interest rates to a peak of 5.25% — versus the pandemic-era rate of just 0.25%.

A mixed weekly picture for U.S. oil demand also weighed on the market. 

The in storage fell by 4.581 million barrels during the week ended April 14, EIA reported. In the previous week to April 7, crude stockpiles rose by 0.597M barrels. Industry analysts tracked by Investing.comhad expected the EIA to report a crude balance decline of just 1.088M barrels for last week.

But on front, the EIA cited a build of 1.3M barrels versus the forecast drop of 1.267M barrels, and against the previous weekly decline of 0.331M. Automotive fuel gasoline is the No. 1 U.S. fuel product.

In terms of product supplied to the market — a clear indicator of end-user demand — finished motor gasoline filled 8.519M barrels last week, down 416,000 barrels from the April 14 tally of 8.936M.

With , the EIA reported a 0.356M barrel draw, against expectations for a drop of 0.927M barrels and versus the prior week’s consumption of 0.606M. Distillates are refined into , diesel for trucks, buses, trains and ships, and fuel for jets.

Just a week ago, oil prices hit their highest levels since November, with WTI reaching $83.53 and Brent rallying to $87.49, extending a run-up that began on April 3 after a production maneuver by OPEC+ to lift a market that had hit 15-month lows in March on global financial worries.

OPEC+, which groups the 13-member Saudi-led Organization of the Petroleum Exporting Countries with 10 independent oil producers, including Russia, said it will cut a further 1.7M barrels from its daily output, adding to an earlier pledge from November to take off 2.0M barrels per day. 

OPEC+, however, has a history of over-promising and under-delivering on production cuts. While the group achieved over-compliance on promised cuts in the aftermath of the 2020 coronavirus breakout, experts say that was more a result of battered demand that led to minimal production, rather than a will to cut barrels as pledged.

“OPEC+ pre-emptive action may have been taken on accurate assumptions on the economy and demand and will not propel the price back above $100,” said Craig Erlam, analyst at online trading platform OANDA.