The Rise in Demand Worries Resulted in a 10% Fall in US Oil Prices in a Week

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US oil prices dropped down by almost 4 per cent. The price dropped to $78.50 a barrel earlier in the day, which is the lowest price since September.

The sharp decline in US oil prices over the past week was mainly due to concerns about weakening fuel demand in China, outweighing fears that Russian supply could drop next month.

Prices fell 10% in the week as a whole. The US benchmark, West Texas Intermediate, ended up losing about 10 per cent this week. It fell to 1.9 per cent on Friday and settled at $80.08 a barrel. It was a massive weekly loss since March.

The slide in oil prices is a stark reminder of the fragility of global demand for fuel, particularly in China. The world’s second-largest economy has seen its crude imports fall 2 per cent yearly, with the possibility that further import cuts could be made if its economic growth begins to slow.

The International Energy Agency trimmed its forecast for global oil consumption growth next year, highlighting the risk of a slowdown in the Chinese economy.

Investors balanced data shows an easing in inflation in the world’s biggest economy against hawkish warnings from the Federal Reserve, resulting in the massive fall in US stocks in the week. The S&P 500 Index dropped 1.2 per cent over the five days after closing at 0.5 per cent on Friday. The Nasdaq Composite Index also retreated, falling 1.6 per cent. The Dow Jones Industrial Average survived again at 0.1 per cent.

Jim Paulsen, the chief investment strategist at The Leuthold Group, a research company, said, “A combination of the delayed effect of contractionary monetary and fiscal policies, the dollar’s strength, and the growing gap between the yields on two-year and 10-year Treasuries are set to ‘significantly slow’ real economic growth in the US.”

“By the first quarter of next year, we guess that the primary consensus concern will be recession rather than inflation,” Paulsen said.

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