Crude slide continues

Crude oil recorded heavy falls last week, posting its biggest weekly drop in close to a year. WTI lost 8% while Brent ended 10% lower. Front-month WTI easily took out its December low, as it dropped under $64 to record its lowest level since early May 2023. It would be easy to put the blame on Friday’s weaker-than-expected Non-Farm Payroll report. But this seems unlikely as the major part of Friday’s decline in oil occurred between 15:00 and 17:00 BST. Interestingly, this period covers a time when risk assets rallied strongly following a relatively upbeat and dovish speech from the FOMC’s Christopher Waller, who supported a rate cut at next week’s Fed meeting. Instead, Friday’s steep sell-off in crude was just a continuation of the downward trend driven by overriding fundamentals. Quite simply, supply remains plentiful while demand looks likely to moderate thanks to China’s weak economy and uncertainty over the outlook for the US. The situation is unlikely to change, even after the Fed cuts rates by 25 basis points next week, as expected.