Oil set for biggest weekly loss since July on demand pessimism

(Bloomberg) – Oil headed for its biggest weekly decline since the middle of July as a streak of disappointing economic data from the US and elsewhere added to fears a global recession is coming.

Futures in New York edged higher Friday but are down around 6% this week. A key measure of American service industry activity dropped to the lowest in three years last month, while an employment gauge registered its weakest print in more than five years.

That came after payrolls and manufacturing numbers fell short of estimates earlier in the week.

The deteriorating US economy – and more signs of weakness in major nations like China and Germany – is worsening what was an already fragile demand outlook.

While the record gains in oil after the Sept 14 attacks on Saudi Arabia evaporated largely due to the kingdom quickly restoring production, the increasing economic gloom has also played a part.

Opec producer Nigeria warned Thursday that oil demand will be “very challenging” next year.

“It’s clear the backdrop has weakened recently,” said Daniel Hynes, a senior commodity strategist at Australian & New Zealand Banking Group Ltd in Sydney.

“However, the market is taking a glass half empty approach to it at the moment” as a significant fall in oil demand hasn’t been seen yet, he said.

West Texas Intermediate for November delivery rose 12 cents, or 0.2%, to US$52.57 a barrel on the New York Mercantile Exchange as of 9:34am in Singapore.

It dropped for an eighth consecutive session on Thursday and is down US$3.34 this week, the most since July 19.

Brent for December settlement climbed 8 cents to US$57.79 a barrel on the ICE Futures Europe Exchange. The contract has fallen 6.6% this week.

The global benchmark crude traded at a US$5.32 premium to WTI for the same month.