Oil prices experienced a decline of over 1% on Friday, marking the fourth consecutive week of falling prices. The market grappled with fears of supply imbalances alongside renewed economic worries in both the United States and China.
Brent crude futures concluded the day down by 81 cents, equivalent to a 1.1% decrease, settling at $74.17. Simultaneously, West Texas Intermediate (WTI) U.S. crude futures saw a decline of 83 cents, or 1.2%, closing at $70.04.
Both benchmarks ended the week roughly 1.5% lower compared to the previous week.
On Friday, the U.S. dollar maintained modest gains against the euro, heading for its most substantial weekly increase since February. Uncertainty surrounding the U.S. debt ceiling and monetary policies prompted a shift toward safer assets.
The stronger U.S. dollar makes oil priced in dollars more expensive for holders of other currencies.
According to John Kilduff, a partner at Again Capital LLC in New York, “Lack of confidence in the economy is translating to a retreat to the safer dollar and is also causing pessimism about oil demand.”
Concerns mounted over the possibility of the United States, the largest oil consumer globally, entering a recession. Talks regarding the U.S. government’s debt ceiling were postponed, and worries intensified over the state of a crisis-hit regional bank.
On Friday, Fed Governor Michelle Bowman stated that if inflation remains high, the U.S. Federal Reserve will likely need to raise interest rates further. She added that the data from this month has not convinced her that price pressures are subsiding.
Meanwhile, China’s consumer price data for April showed slower growth compared to March, failing to meet expectations. Moreover, persistent deflation in factory gate prices raised doubts about China’s recovery from COVID-19 restrictions, which in turn affected oil demand growth.
The oil and natural gas rig count in the United States dropped this week to its lowest level in nearly a year. Baker Hughes Co, an energy services firm, reported that gas rigs experienced the most significant weekly decline since February 2016.
U.S. oil rigs declined by two to reach 586 this week, the lowest count since June 2022, while gas rigs plummeted by 16 to 141, the lowest count since April last year.
Despite this, the market found some support in the projected emerging supply deficit for the second half of the year. However, Iraq’s oil minister, Hayan Abdel-Ghani, expressed doubt that OPEC+ would decide on further production cuts during their next meeting in Vienna on June 4, according to a Reuters interview.
In a report released on Thursday, OPEC stated that it anticipates higher demand for its own crude from July to December, projecting an increase of 90,000 barrels per day (bpd) compared to previous estimates.
OPEC kept its global oil demand forecast for 2023 unchanged, believing that increased Chinese demand growth would offset economic risks.
Another factor lending support to the market was a statement from U.S. Energy Secretary Jennifer Granholm, suggesting that the country could repurchase oil for the Strategic Petroleum Reserve (SPR) after completing a congressionally mandated sale next month.
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