Oil prices soared to their highest level in almost a year on Friday, snapping a two-week losing trend, boosted by predictions of tightened supply.
Saudi Arabia is largely anticipated to extend a voluntary 1 million barrel per day oil production cut beyond October, extending supply cuts planned to maintain prices by the Organization of the Petroleum Exporting Countries (OPEC) and allies known as OPEC+.
Russia, the world’s second-largest oil exporter, has already decided to decrease oil exports next month with OPEC+ allies, Deputy Prime Minister Alexander Novak said on Thursday.
Brent crude finished the day up $1.66, or 1.9%, at $88.49 a barrel. It had earlier reached a session high of $88.75 per barrel, the most since Jan. 27.
West Texas Intermediate crude (WTI) in the United States had climbed $1.39, or 1.7%, to $85.02. It had previously risen to $85.81, its highest level since November 16.
Brent climbed 4.8% this week, the biggest in a single week since late July. WTI gained 7.2% last week, the largest weekly rise since March.
“There is a realization that the economy is not disappearing and signs that demand is near record highs,” Price Futures Group analyst Phil Flynn said. “People have to face the cold, hard reality that supplies are below average.”
According to surveys performed by the US Energy Information Administration, the appetite for oil in the United States has been strong, with commercial crude inventories dropping in five of the most recent six weeks.
On Friday, a closely awaited U.S. data showed a rise in the unemployment rate and a slowing in wage growth, increasing predictions of a pause in interest rate hikes.
Meanwhile, expectations for demand recovery in other markets are rising.
According to private surveys, the eurozone industrial downturn eased last month, indicating that the worst may be over for the bloc’s troubled manufacturers, while an unexpected comeback in China offered some hope for export-reliant economies.
Both OPEC and the International Energy Agency are counting on China, the world’s largest oil importer, to support oil demand for the remainder of 2023, but the country’s slow recovery has investors anxious.
According to Tamas Varga of oil broker PVM, the remainder of this year promises to bring supply shortages, due in part to reasonably solid global consumption and in part to Saudi desire to offer a high price floor.
“Unless the Chinese economy shows a confident revival next year, the mood will deteriorate significantly,” he said.
In terms of future supply, US oil rigs remained constant this week at 512, the lowest level since February 2022, according to energy services firm Baker Hughes on Friday.
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