Oil prices have tumbled about 5% to a three-week low, led by a slump in US gasoline futures, as investors worried interest rate hikes from major central banks could slow the global economy and cut demand for energy.
Also pressuring prices, the US dollar this week rose to its highest since December 2002 against a basket of currencies. A stronger dollar makes oil more expensive for buyers using other currencies.
Brent futures fell $5.85, or 4.9%, to $113.96 a barrel by 4.02pm Irish time. US West Texas Intermediate crude fell $6.66, or 5.7%, to $110.93. Both were on track for their lowest closes since 25 May.
There will be no US trading on Monday, for the Juneteenth holiday.
Brent was headed for its first weekly dip in five weeks, and WTI for its first weekly decline in eight weeks.
"With the central banks making pretty substantial moves to limit growth via interest rate hikes and monetary tightening is showing up here in the petroleum complex," said John Kilduff, partner at Again Capital LLC in New York, noting slower economic growth should cut energy demand.
US gasoline futures slid about 6% with analysts worried high pump prices will reduce demand.
Global central bankers who quickly loosened monetary policy during the pandemic to avoid a depression, are now trying to fight inflation. read more
"The influence of the macro environment has started to take over from oil-specific fundamentals in recent days," said Investec's head of commodities Callum Macpherson.
The Federal Reserve this week hiked rates by the most in more than a quarter of a century and signaled it will stay focused on fighting inflation. read more read more
With the Fed expected to keep raising interest rates, open interest in WTI futures on the New York Mercantile Exchange fell yesterday to its lowest since May 2016 as investors cut back on risky assets.
The global oil market continues to show signs of "turbulence", Russian Deputy Prime Minister Alexander Novak said, blaming uncertainties over oil production recovery in Libya, Iran and Venezuela and a lack of energy infrastructure.
The market's turbulence has increased since Russia invaded Ukraine on 24 February.
Russian gas flows to Europe fell short of demand on Friday as an early heatwave in the south boosted demand for air-conditioning.
The European Union's executive recommended that Ukraine and Moldova become candidates for membership in the world's largest trading bloc.