After a small recovery the day before, crude oil prices declined in early trade on Friday, putting them on pace to decline for a second consecutive week due to concerns that China’s COVID-19 limitations and aggressive rate hikes by central banks could impact demand.

Brent crude futures slipped 12 cents, or 0.1%, to $89.03 a barrel at 0051 GMT after rising 1.3% on Thursday.

After rising 2% in the previous session, U.S. West Texas Intermediate (WTI) crude futures decreased by 19 cents, or 0.2%, to $83.35 a barrel. The market fell briefly to its lowest position since January, as both benchmarks lost approximately 4% for the week.

The decline has occurred despite a modest output cut by OPEC and its partners, collectively known as OPEC+, Russia’s threat to cut off Crude oil supplies to any nation that supports a price ceiling on its crude, and a dimmer picture for U.S. Crude oil production growth.

In contrast to an earlier forecast of a rise of 610,000 BPD, the U.S. On Thursday, the Energy Information Administration announced that it now anticipates that in 2022, the U.S. crude output will rise by 540,000 barrels per day to 11.79 million BPD.

The sell-off, which caused the 50-day moving average to cross below the 200-day moving average mid-week in a formation known as a “death cross,” may have been exaggerated, according to analysts, given the supply forecast, as demand in China, the world’s largest Crude oil importer, might quickly rebound.

Analysts on Demand

“Demand from the China is more difficult to forecast, although, after the COVID reopening, demand has historically increased suddenly rather than gradually. In such a situation, it appears that the fundamentals are at odds with the most recent technical indications, “Analysts at the National Australia Bank stated in a note.

Curbs are currently getting tighter in China. On Thursday, majority of Chengdu’s more than 21 million residents were kept in lockdown, while millions more people in other parts of China were warned not to travel over the forthcoming holidays.

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