NEW YORK (BLOOMBERG) – Oil posted the biggest weekly decline since early April on growing signs that a global economic slowdown is curbing demand. Prices are near the lowest level in six months.

West Texas Intermediate settled at US$89 a barrel, ending the week nearly 10 per cent lower. United States gasoline consumption has dropped, stoking demand concerns, while low liquidity has added to volatility. Supplies from Libya also picked up, helping to shrink key oil futures time-spreads and ease the tightness in the market. The pullback is evident across the oil market. Gasoline futures were down 18 per cent last week.

Meanwhile, physical oil differentials have narrowed and Brent’s prompt spread – the difference between its two nearest contracts and a gauge of supply – shrunk to US$1.73 a barrel in backwardation, down from more than US$6 a week ago.

In backwardation, prices for a front-month loading contract are higher than contracts for later loadings, signalling tight supply.

“Crude broke several technical levels in a week that has been a bloodbath for super-cycle believers,” said senior energy trader Rebecca Babin at CIBC Private Wealth Management. “The action, however, indicates that this was more of a buyers’ strike than meaningful position reduction, as buyers are content to sit on the sidelines until the broader narrative around demand improves.”

After surging in the first five months of the year, crude’s rally has been thrown into reverse, with losses deepening this month after declines in June and July. The sell-off, which has been exacerbated by below-average trading volumes, may alleviate some of the inflationary pressures coursing through the global economy that have spurred central banks including the US Federal Reserve to hike rates.

The shift to tighter monetary policy has stoked concern among investors that growth will slow, imperilling the outlook for energy usage. The Bank of England warned that Britain is heading for more than a year of recession as it raised borrowing costs, while in the US, a procession of Federal Reserve speakers pledged to continue an aggressive fight to cool inflation.

China has also shown signs of weakness, clouding the outlook for crude consumption in the top importer. Recent data showed factory activity shrank, while China Beige Book International warned the economy was deteriorating.

Still, there were some signs of bullishness with Saudi Arabia last week boosting its prices, and Opec+ warning of scant spare capacity. Saudi Aramco increased its Arab Light grade for next month’s shipments to Asian refineries to a record US$9.80 a barrel above the Middle Eastern benchmark. Traders and refiners had expected an even bigger jump.