As the week heads to a close, oil is set to experience its second weekly drop of over 7%, as the demand outlook worsens, and concerns spread through the crude market.

Across the globe, winter-delivery crude demand has plummeted, as the forward curve for the two major benchmarks, West Texas Intermediate and European Brent, have weakened, indicating there are more ample supplies available. Although West Texas Intermediate rose above $82 per barrel, for a second week futures have declined.

Crude has fallen to the lowest levels since September, amid concerns that the rapidly expanding number of Covid cases in China, as well as hawkish fiscal policies from central banks across the globe, will combine to drive down the demand outlook. Recent comments by Federal Reserve officials indicating they do not see any significant retreat in inflation, and that peak rates may have to go higher than had been expected have not helped support the price of crude.

Ed Moya, senior market analyst at Oanda Corp noted, “Oil prices can’t shake off a deteriorating short-term crude outlook from the world’s two largest economies. Energy traders are also scratching their heads,” as demand continues to decline, even as a ban on Russian crude supplies by the European Union draws near.

Starting in early December, the European Union will begin banning Russian seaborn crude flows, just as the winter demand season begins to enter high gear. Globally, analysts also note fuel markets are tighter, especially for refined products like diesel.

Brent’s backwardation has continued to narrow this month, which indicates a loosening of supply.  The difference between Brent’s two nearest contracts, called the prompt spread, has fallen to 85 cents per barrel, from $2.02 at the end of October. The spread on West Texas Intermediate has also fallen dramatically.