Crude oil falls 9% in past week but gas prices up as cold weather sets in  

Europe's first cold spell heading into the depths of winter is testing the resolve of countries to continue limiting gas use after they comfortably exceeded an EU reduction target, analysis of consumption data shows. Picture: Denis Minihane

Oil prices lost about 9% in the past week on global recession fears, while European wholesale gas prices have risen as the extended cold snap moves in across the continent. 

Energy prices are closely watched on hopes the outlook for inflation that has ravaged world economies since Russia invaded Ukraine in February will ease in the coming months. 

The price of Brent crude rose slightly in the session to $76.55 a barrel, but is down sharply for a second successive week, as worries over weak economic outlook in China, Europe and the US weighed on oil demand. Brent crude had earlier this week hit a low for the year. 

In China, surging infections will likely depress economic growth in the next few months despite some restrictions being eased, bringing a rebound only later in 2023, economists said. 

Also on the downside, the US economy is heading into a short and shallow recession over the coming year, according to economists polled by Reuters who unanimously expected the US Federal Reserve to go for a smaller 50 basis points rate hike next week. 

"The EU's oil embargo against Russia and the G7 price cap on Russian oil that came into force at the start of this week have been just as powerless to prevent this as the easing of coronavirus restrictions in China and robust Chinese crude oil imports have," Commerzbank analyst Carsten Fritsch said.

Cold spell

Meanwhile, Europe's first cold spell heading into the depths of winter is testing the resolve of countries to continue limiting gas use after they comfortably exceeded an EU reduction target, analysis of consumption data shows. 

Prices of European gas for delivery in January rose 4% on Friday as the cold weather set in.     

European countries on average cut their natural gas consumption by 24% in November from the 2019-2021 average for the same month, according to Reuters calculations. 

"European gas consumption has dropped for two reasons — first, mild temperatures earlier this fall considerably dampened household demand, and second, high prices have led to demand destruction in the industrial sector," Barclays European economist Mark Cus Babic said.

"Household demand is still very responsive to the weather, so we think the latter is a more robust source of savings going forward," he added. 

• Reuters and Irish Examiner