Oil prices end week on multi-month lows on recession fears

Oil prices settled higher on Friday, recouping some of this week's losses on strong U.S. job growth data, but closed the week at their lowest levels since February, rattled by worries a recession could hit fuel demand.

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Brent crude settled 80 cents to $94.92 a barrel, 11%
off last Friday's settlement. U.S. West Texas Intermediate crude settled 47

cents to $89.01, off 8% in the week.

U.S. job growth unexpectedly accelerated in July as
nonfarm payrolls increased by 528,000 jobs, the largest gain since February,

the U.S. Labor Department reported.

"This is strong economic data that's supporting
the oil market rise today," said Bob Yawger, director of energy futures at

Mizuho.

Oil traders this week have fretted about inflation,
economic growth and demand, but signs of tight supply kept a floor under

prices.

The number of oil rigs, an early indicator of future
output, fell seven to 598 in the week to Aug. 5, the first weekly decline in 10

weeks, energy services firm Baker Hughes Co BKR.O said in its closely followed

report on Friday.

Recession worries have intensified since the Bank of
England's warning on Thursday of a drawn-out downturn after it raised interest

rates by the most since 1995.

"Clearly, everyone is taking the threat of
recession far more seriously as we're still seeing a very tight market and

producers with no capacity to change that," said Craig Erlam, senior

market analyst at Oanda in London.

Supplies were still relatively tight, with prompt
prices still higher than those in future months, a market structure known as

backwardation.

The OPEC+ producer group agreed this week to raise its
oil output goal by 100,000 barrels per day (bpd) in September, but this was one

of the smallest increases since such quotas were introduced in 1982, OPEC data

showed.

Supply concerns were expected to ratchet up closer to
winter, with European Union sanctions banning seaborne imports of Russian crude

and oil products set to take effect on Dec. 5.

"With the EU halting seaborne Russian imports,
there is a key question of whether Middle Eastern producers will reroute their

barrels to Europe to backfill the void," said RBC analyst Michael Tran.

"How this Russian oil sanctions policy shakes out
will be one of the most consequential matters to watch for the remainder of the

year."

By Laura Sanicola / August 6, 2022 3:56 AM