Oil falls on uncertainty over fuel demand recovery

Drilling for oil in Weld County on Monday, Aug. 17, 2020. (CPR News photo)

SULAIMANI (ESTA) — Oil prices fell on Friday as investors worried that weakening global economic growth and tighter central bank monetary policy could curb a recovery in fuel demand.

Brent futures fell 2 cents to $112 a barrel by 1053 GMT, while U.S. West Texas Intermediate (WTI) crude fell 19 cents to $112 on its last day as the front-month.

The International Monetary Fund (IMF) urged Asian economies to be mindful of spillover risks from monetary tightening, according to Reuters.

Asian economies faced a choice between supporting growth with more stimulus and withdrawing it to stabilize debt and inflation, Reuters cited IMF Deputy Managing Director Kenji Okamura as saying.

While Bank of Japan policy runs counter to a global shift towards monetary tightening, central banks in the United States, Britain and Australia raised interest rates recently, Reuters reported.

Crude gains have been limited this week, with Brent and WTI mostly trading in a range due to the uncertain path of demand. Investors, worried about rising inflation and more aggressive action from central banks, have been reducing exposure to riskier assets.

Open interest in WTI futures fell to 1.722 million contracts on May 18, the lowest since July 2016.

“If U.S. growth data continues to sour, oil prices could get caught up in the negative stock market feedback loop,” Reuters quoted SPI Asset Management Managing Director Stephen Innes as saying.

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