Oil prices up after Basra spill, but log weekly decline

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NEW YORK – Oil prices rose slightly on Friday as a spill at Iraq’s Basra terminal looked likely to limit crude supplies, but remained lower for the week on fears that strong interest rate increases slow global economic growth and fuel demand.

Brent crude futures settled at $91.35 a barrel, up 51 cents, while U.S. West Texas Intermediate (WTI) crude futures settled at $85.11 a barrel, up 1 a hundred more

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Both benchmarks were down nearly 2% for the week, hurt in part by a strong U.S. dollar, which makes oil more expensive for buyers using other currencies. The dollar index was largely flat on the day, but rose for its fourth week in five weeks.

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In the third quarter so far, both Brent and WTI are down 20% for the biggest quarterly percentage declines since the start of the COVID-19 pandemic in 2020.

Oil exports from Iraq’s Basra oil terminal are gradually resuming after they were halted last night due to a spill, which has been contained, Basra Oil Company said.

The spill at the port, which has four loading platforms and can export up to 1.8 million barrels a day, sent prices higher on the prospect of lower global crude supplies.

“This definitely caused a scare in the market because the initial report was that those barrels were going to be off the market for a while,” said John Kilduff, a partner at Again Capital LLC in New York.

Investors are bracing for a big hike in US interest rates, which could trigger a recession and reduce demand for fuel. The Federal Reserve is expected to raise its benchmark overnight interest rate by 75 basis points at a policy meeting on September 20-21.

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“The growing likelihood of a global recession, as underscored by the recent renewed decline in stocks, could continue to limit upside (oil) possibilities over the next month and possibly beyond,” said Jim Ritterbusch of Ritterbusch and Associates in a memo.

The market was also weighed down by the International Energy Agency’s outlook for near-zero oil demand growth in the fourth quarter due to a weaker demand outlook in China.

“Both the IMF and the World Bank warned that the global economy could slip into recession next year. This spells bad news for the demand side of the oil currency and comes a day after forecast (about) of IEA oil demand,” said PVM analyst Stephen Brennock.

“Recession fears coupled with higher expectations for US interest rates made for a potent bearish cocktail.”

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Other analysts said sentiment was hurt by comments from the US Energy Department that it was unlikely to try to replenish the Strategic Petroleum Reserve until after the 2023 fiscal year.

On the supply side, the market has found some support in subdued expectations of a return of Iranian crude as Western officials play down the prospect of reviving a nuclear deal with Tehran.

Oil prices could also be supported in the fourth quarter if OPEC+ members cut production, which will be discussed at the group’s meeting in October. Europe is facing an energy crisis fueled by uncertainty over oil and gas supplies from Russia.

U.S. crude supplies appeared headed for a rise as energy companies this week added oil and natural gas rigs for the first time in three weeks as relatively high crude prices encouraged some firms to drill more , mainly in the Permian Basin, according to the energy services company. Baker Hughes Co. (Additional reporting by Shadia Nasralla in London, Gertrude Chavez in New York, Sonali Paul in Melbourne and Emily Chow in Singapore Editing by David Goodman, Louise Heavens, Paul Simao, David Gregorio and Diane Craft)