Oil declines for second week as supply fears retreat

Oil dropped by about 2% on Friday, logging a second weekly decline, due to concern about weakened demand in China and further increases to US interest rates. Brent crude settled at $87.62 a barrel, falling $2.16, or 2.4%. U.S. West Texas Intermediate (WTI) crude settled at $80.08 a barrel, losing $1.56, or 1.9%.

Both benchmarks posted weekly losses, with Brent down about 9% and WTI roughly 10%. The market structure of both oil benchmarks shifted in ways that reflect dwindling supply concerns.

Supply concerns are fading. The current WTI contract is now trading at a discount to the second month, a structure known as contango, for the first time since 2021, Refinitiv Eikon data showed.

This condition will also benefit those looking to put more oil in inventories for later, especially with stocks still at low levels. The US rig count is up three from last week to 782 with oil rigs up one to 623, gas rigs up two to 157 and miscellaneous rigs unchanged at two, according to the Baker Hughes Rig Count.