By Ambar Warrick
Investing.com-- Oil prices tumbled further below key levels on Friday, and were set for large weekly losses as an escalation in China-Taiwan tensions and an interest rate hike by the Bank of England painted a dim picture for crude demand.
As of 2011 ET (0011 GMT), Crude Oil WTI Futures traded down 0.3% at $88.30 a barrel, their weakest level since early February, before Russia’s invasion of Ukraine.
Brent oil futures rose 0.5% to $93.81 a barrel. Both indicators had slumped over 3% on Thursday, and were headed for weekly losses of between 12% and 17%.
Crude prices plummeted on Thursday after China fired missiles around Taiwan, escalating tensions triggered by U.S. House of Representatives Speaker Nancy Pelosi’s visit to Taipei.
The move significantly worsens sentiment towards Asia’s largest economies, and is likely to dent other asset prices in the region.
Additionally, the Bank of England raised interest rates and signaled more measures to combat inflation, suggesting that the UK is set for economic ructions in the near term.
Sharp monetary policy tightening in the developed world is driving up concerns over a coming recession, as most countries struggle with high inflation.
Losses in oil prices this week were triggered by a swathe of weak manufacturing data, which raised concerns over slowing demand.
A surprise jump in weekly U.S. crude stockpiles also pointed to a potential supply glut in the world's largest oil consumer.
Against this backdrop, the Organization of Petroleum Exporting Countries and allies (OPEC+) rolled out its smallest ever supply hike, indicating a dour outlook for demand.
Still, a brewing energy crisis in Europe could help keep oil prices underpinned, even as global demand drops. The bloc is struggling to wean away from Russian-supplied oil and gas over Moscow's invasion of Ukraine.
The fall in oil prices also provides some relief to import-heavy countries struggling with inflation driven by high fuel prices.
Focus is now on U.S. nonfarm payrolls data, due later in the day, which will provide more clues on the world's largest economy.