Oil prices fluctuated near $107 a barrel as investors watched for developments from the Group of Seven summit. Worries about a potential recession kept pushing the market.
After rising 3.2% on Friday, the price of West Texas Intermediate reversed and ended the week with a loss. The G-7 agreed to provide Ukraine with aid and protection against Russia. It also discussed setting a price cap on oil production.
Oil prices are expected to drop for the first month since November as investors grew concerned about a potential global recession. Rising interest rates are also contributing to the increase in inflation. Although gasoline prices have fallen fast, they aren't as low as crude because of a lack of refining capacity.
In his years as an energy fund manager, Eric Nuttall had never seen crude oil trading at more than $100 a barrel. Despite the recent volatility, Nuttall said he had to handle his clients' concerns about the oil market.
According to Nuttall, energy investors are currently paralyzed by fear due to the oil market's uncertainty. He said that they are also reacting negatively to the potential impact of a recession on demand for oil. The fund manager described the situation as a negative feedback loop.
Over the past month, investors have been concerned about the potential impact of rising interest rates on the economy. This has led to a selloff in the stock market and a decline in commodity prices.
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Oil flashes bull sign
According to Gao Jian, a Zhaojin Futures Co. analyst, the oil price will likely fall due to economic concerns. However, he noted that tight supplies will prevent the market from experiencing a significant decline.
Despite the recent volatility, the oil market is still showing bullishness. Global oil supplies are still tight due to the invasion of Ukraine and Russia's actions in the country. Time spreads on oil futures contracts are also signaling a lack of supply.
Officials from the G-7 are still trying to agree on setting a price cap on Russian oil. According to sources, the mechanism could restrict Russian oil shipping and insurance transactions.
According to analyst Vivek Dhar of Commonwealth Bank of Australia, a price cap would not be able to achieve its objective. Russia is still threatening to stop exporting refined products and oil to the G-7 nations. This could cause a shortage in the global oil markets.
"It's unclear whether a price cap will achieve this outcome," Dhar said. "There's still nothing stopping Russia from banning oil and refined product exports to G7 economies in response to a price cap, exacerbating shortage conditions in global oil and refined product markets."
Iran nuclear talks
The G-7 will also discuss the possible resumption of the Iran nuclear talks, which have been stalled since November. A French president said that the European Union's foreign minister had met with Iranian officials to try and revive the negotiations.
According to Tina Teng, an analyst at CMC Markets, the market will focus on the Iran talks' possible resumption. This could lead to a significant increase in the country's oil exports.
The leaders of the G-7 are also expected to discuss the need for new financing for the development of fossil fuels. The group is considering recognizing the need for more support for the energy sector.