Oil prices closed higher on Friday, its second consecutive week of gains, as the supply disruption through a Turkish port continues to affect an already tight market.
Brent, the benchmark for two thirds of the world’s oil, rose 1.64 per cent to settle at $79.89 a barrel on Friday. West Texas Intermediate, the gauge that tracks US crude, gained 1.75 per cent to close at $75.67 a barrel.
Brent prices rose 6.5 per cent over the previous week and WTI gained +9.3 per cent.
Prices had rallied on Monday, their biggest one-day gain since October, when Brent climbed 4.2 per cent to settle at $78.12 and WTI surging 5.1 per cent to $72.81.
Gains this week were largely supported by a halt to exports from Iraq's Kurdistan region, which disrupted about 450,000 barrels per day.
A legal dispute between Iraq, its semiautonomous Kurdistan region and Turkey halted the supply of crude exports to the global market on Saturday.
Iraq won a long-standing arbitration case against Turkey that led to the stoppage of crude exports from Turkey’s Ceyhan port, which added to supply concerns in an already tight market.
Gulf Keystone Petroleum is the latest producer to cut production amid an impasse between Kurdistan and the Iraqi federal government.
Officials from the two sides are expected to hold negotiations next week, which could lead to the resumption of supply of Kurdish oil that flows to the market through Turkey.
“The interruption of supplies from the KRG [Kurdistan Regional Government] to a port in Turkey will help to keep a floor under prices in the near term as some output is being shut in due to the lack of pipeline availability,” Khatija Haque, head of research and chief economist at Emirates NBD, said in a note on Friday.
A brightening economic outlook and easing concerns over the banking crisis also supported the oil rally this week.
Signs of an economic recovery taking hold in China have strengthened this month, with a pick-up in activity in the manufacturing and construction sectors of the world’s second-largest economy.
Oil prices are also poised to draw strength in the short term from an expected recovery of crude demand in China.
China's oil imports are set to rise 6.2 per cent in 2023 to 540 million tonnes, Reuters said, citing a report by a research unit of China National Petroleum Corporation, on Monday.
Goldman Sachs recently reduced its oil price forecasts for 2023, citing growing crude supplies and lower demand.
The investment bank now expects Brent to trade at $94 a barrel in the coming 12 months and at $97 in the second half of 2024. It had previously projected that the benchmark would trade at $100 in both scenarios.
“Oil prices have continued to recoup losses in recent days as sentiment has recovered [while] yields have edged higher and global economic prospects have improved,” Craig Erlam, senior market analyst at Oanda, said.
“Recent volatility has been a firm reminder of the uncertainty that lies ahead, even as we seemingly near the end of the tightening cycles. While some consequences of much higher interest rates will be obvious, others will be much harder to foresee and that brings downside risks for growth.”
Although crude could post the weekly rise, it is on track for its fifth monthly loss. The losses in March were largely driven by banking sector turmoil.
The collapse of US lender Silicon Valley Bank earlier this month stoked fears of a global banking crisis, similar to when Washington Mutual collapsed in 2008.
In the days after SVB's collapse, mid-size lenders Signature and Silvergate Bank both failed and shares tumbled at other regional banks.
Contagion fears also spread to Europe, where Switzerland's Credit Suisse was acquired by rival UBS in a deal engineered by Swiss government authorities.
However, the Federal Deposit Insurance Corporation confirmed on Monday that US lender First Citizens Bank & Trust would acquire the troubled SVB.
Mr Erlam said an upside in oil prices could be “on the cards” but it will depend on several factors.
“Brent and WTI are currently trading around the range lows from early December to early March and it will be interesting to see if they can break back above that psychological barrier,” he said.