By Peter Nurse
Investing.com -- Oil prices weakened Thursday, falling back from the seven-week highs seen earlier in the week on broad concerns about a potential dramatic slowdown in global growth.
By 9:20 AM ET (1320 GMT), U.S. crude futures traded 2% lower at $104.94 a barrel, while the Brent contract fell 1.6% to $107.38 a barrel.
U.S. Gasoline RBOB Futures were down 2.8% at $3.6171 a gallon.
Crude markets, along with most risky markets, have headed lower of late amid concerns the surging inflation, and the associated monetary policy tightening, will curtail retail spending, severely impacting future growth.
Federal Reserve Chairman Jerome Powell warned earlier this week that there could be some economic pain involved in bringing inflation down, and there were fresh signs that the U.S. economy is starting to cool down on Thursday, as lay-offs hit a 10-week high and a closely watched survey of manufacturing activity took a sharp turn for the worse.
Influential investment bank Goldman Sachs cut its forecasts for U.S. growth for this year and next at the start of the week, and on Wednesday reduced its China 2022 GDP growth forecast as a result of COVID-related damage to the economy in the second quarter of this year.
The commercial hub of Shanghai has recorded a fourth consecutive day without any new infections outside the most locked-down areas, but restrictions won't be fully eased until early in June.
“It is pretty clear that with China’s COVID-zero policy, demand risks will continue to linger,” said analysts at ING, in a note.
Also weighing is the idea that the EU’s proposed sanctions package won’t in any case spell the total end of Russian exports to Europe, given the strong opposition from a number of eastern European countries, Hungary in particular, leaving European buyers having to cover a slightly less acute supply shortfall.
That said, "ultimately, this is a supply-side story," said Fawad Razaqzada, analyst at City Index. "Unless OPEC and its allies ramp up production and fast, it is difficult to see how prices can go down meaningfully."
Reports indicate that China is seeking to replenish its strategic crude stockpiles with Russian oil, suggesting Moscow’s supply won’t be entirely lost to world markets.