Crude Oil Rises; First Losing Week in Three Approaches

By Peter Nurse

Oil prices experienced an increase on Friday; however, they remain on track for their first weekly decline in three weeks due to worries that global demand may be affected by sluggish economic growth.

As of 9:10 AM ET, futures were trading 2.7% higher at $108.92 a barrel, while the contract rose 2.4% to $110.05 a barrel. Despite these gains, both benchmarks are expected to register weekly losses, with Brent down approximately 3% and WTI falling by just under 2%.

In the U.S., gasoline prices rose 2.5% to $3.8864 a gallon.

This year, oil prices have surged more than 40% primarily driven by supply concerns following Russia’s invasion of Ukraine and the recovery of economies post-pandemic. However, recent comments on demand amid weaker global growth, inflation, and COVID-related restrictions in China have dampened market confidence.

The International Energy Agency (IEA) revised its forecast for global oil demand in its latest monthly report, released on Thursday. The agency now anticipates global demand to rise by an average of only 3.4 million barrels per day this year, down from a previous estimate of 3.7 million barrels per day.

In a more pessimistic outlook, the Organization of the Petroleum Exporting Countries (OPEC) predicted in its monthly report, also released Thursday, that demand would increase by about 1.8 million barrels per day this year, significantly less than the 3.3 million barrels per day that was expected at the start of the year.

Analysts at ING noted that declining demand expectations are primarily driven by COVID-related lockdowns in China, rising prices, and moderate economic growth.

Earlier on Friday, authorities in Beijing had to dispel rumors about a potential lockdown in the capital as COVID cases rose, while restrictions in Shanghai continue to persist.

In the international arena, foreign ministers from the G7 industrial nations met on Friday to agree on providing additional aid and weaponry to Kyiv, which is putting increased pressure on Russia to reconsider its ongoing invasion of Ukraine.

There are, however, uncertainties regarding the European Union’s ability to reach a consensus on banning the importation of Russian oil and gas as part of a larger sanctions package, with Hungary opposing the measure, which requires unanimous agreement.

Additionally, the count of U.S. oil rigs is set to be released later in the session, as is typical for the end of the week.