Oil Prices Extend Gains As Fundamentals Come Into Focus
- Oil prices are set to post a third consecutive weekly gain, with Brent nearing $81 and WTI changing hands for $76.41.
- Bullish sentiment is building in oil markets despite continued economic headwinds and the IEA reducing its oil demand growth forecast.
- Supply disruptions in Libya, Saudi Arabia’s production cut, and signs of lower Russian oil exports all gave oil prices a boost this week.
Crude oil prices were set to book their third week of gains today as fundamentals begin to resurface as a factor for traders.
In pre-noon trade in Asia Brent crude was trading at close to $81 per barrel and West Texas Intermediate was changing hands for $76.41 per barrel, not least because of production disruptions in Libya.
Prices moved higher despite a new oil demand estimate from the International Energy Agency that said it expected demand to grow more weakly than previously estimated, because of slower economic growth.
The agency continues to see a record-high global oil demand in 2023, at 102.1 million barrels per day, its closely-watched Oil Market Report showed on Thursday.
However, the pace of growth in demand was lowered by 220,000 bpd from last month’s projection, the first downward revision to oil demand growth for this year from the IEA.
“Persistent macroeconomic headwinds, apparent in a deepening manufacturing slump, have led us to revise our 2023 growth estimate lower for the first time this year,” the agency said.
On the other hand, the U.S. reported lower inflation figures than expected, which stimulated expectations about greater oil demand that would be bullish for prices in a tight-supply environment, contributing to the oil benchmarks’ weekly performance.
In addition, the first signs are emerging of lower Russian oil exports, contributing to the tighter supply environment perception.
"Crude prices are getting a boost from expectations that the oil market will get very tight as Libya and Nigeria deal with disruptions, also while Russian crude exports finally decline," Reuters quoted OANDA senior analyst Edward Moya as saying.
Prices have “some room to run with the oil balance looking increasingly tight for the remainder of the year,” the head of commodities for the Commonwealth Bank of Australia, Vivek Puri, told Bloomberg.