In April, oil went for its first back-to- back weekly loss as fears of a global recession and tighter US monetary policy ripped through commodity markets to spur a broad sell-off.
West Texas Intermediate traded above $104 a barrel after diving more than 6% over the previous two sessions. The US benchmark has dropped close to 5% this week, putting prices on course for their first monthly drop since November.
The oil rally went into reverse earlier this month on the escalating concern of a global slowdown as central banks, including the Federal ReserveFederal Reserve, boosted interest rates to combat raging inflation. The war in Ukraine continues and supply risks persist, and prices have sunk despite signs that energy markets remain tight in the near term. Stephen Innes, managing partner at SPI-Asset Management, said the market is reacting to a Fed-induced slowdown, with WTI crude falling into sell mode.
This week s drop unfolded as Fed Chair Jerome Powell reiterated his commitment to reining in the pace of US price gains. Last week, policy makers raised rates by 75 basis points and Powell signaled another move of that size or a 50 point increase was on the table for July's meeting.
Oil markets remain in backwardation, a bullish pattern in which near-term prices trade above longer-dated ones, a sign of the current tightness. The crude market has been deprived of new data on the state of US inventories this week. The Energy Information Administration stockpile report was delayed after a power disruption damaged some of the agency's hardware.
The Age of Credibility for Central Banks is over, and there is no way for that to happen.