LONDON - The price of Brent oil hit an 18-month low point on Friday amid weak demand expectations for crude, before recovering slightly heading into the weekend break.
New York’s main contract, light sweet crude for August, fell on Friday to an eight-month low of $77.56 a barrel. It too later recovered to stand at $78.51, up 31 cents. “Oil market sentiment has worsened significantly over the past week,” in part “by a hardening of attitudes over the likely duration and scale of euro area problems,” said Barclays Capital analyst Amrita Sen.
Meanwhile dimming hopes for stronger global economic growth and the United States’ persistently brimming stockpiles pushed crude oil prices sharply lower on Thursday, with both major benchmarks losing more than 3.7 percent. Brent on Thursday also went under $90 for the first time in 18 months.
Demand expectations lost ground after data signalled more weak economic growth in the United States, China and Europe, and US Energy Department figures showed an unexpected expansion of stockpiles.
The falls were all about the poor signs for economic growth and oil consumption from data around the world, against a general rise in output especially in North America.
Muted new stimulus efforts and a cut in the US growth forecast by the Federal Reserve on Wednesday were followed Thursday by a dim reading on a closely watched China industry purchasing managers’ index (PMI) from HSBC bank, which fell to 48.1 in June from 48.4 in May on shrinking exports and weak domestic demand.
And in Europe the research firm Markit’s EU-wide PMI for June was at its lowest level for three years as business sentiment deteriorated in the crisis-hit region, a key survey showed Thursday.
“Recession always poses the greatest downside risk for the oil price,” said James Williams of WTRG Economics.
On top of that was the surprise jump in US commercial oil reserves. Stocks unexpectedly climbed by 2.9 million barrels last week to their highest level for nearly 22 years.