Oil Heads for Weekly Drop as Demand Woes Offset Middle East Risk

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Oil Heads for Weekly Drop as Demand Woes Offset Middle East Risk

(Bloomberg) — Oil headed for a fourth weekly drop as demand concerns in the world’s two biggest economies overshadowed heightened geopolitical risk.

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Brent crude traded near $80 a barrel after dropping by 1.6% on Thursday, while West Texas Intermediate was below $77. Factory gauges in the US and China both showed a contraction on Thursday, indicating signs of weakness in manufacturing. Crude had jumped on Wednesday after the ******** of ****** and Hezbollah leaders led to heightened tensions in the Middle East.

Oil is set for its longest streak of weekly declines since December, as concerns linger about consumption in No. 1 importer China and as OPEC+ is set to increase production from next quarter — a plan it reiterated at a monitoring meeting on Thursday. Still, futures remain modestly higher this year, helped by expectations that monetary easing in the US will boost consumption, with Federal Reserve Chair Jerome Powell saying an interest rate cut could come as soon as September.

Widely watched market metrics are also signaling less tight conditions. Despite still holding in a bullish, backwardated structure, the gap between Brent’s two nearest contracts has narrowed. The spread was last 60 cents a barrel in backwardation, compared with over a dollar two weeks ago.

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