Oil posts second weekly gain on fall in US crude stocks and output cuts

Oil edged higher on Friday and posted a second straight weekly gain on a drop in US crude stocks and output cuts by Saudi Arabia and Russia . Brent, the benchmark for two thirds of the world’s oil, settled 2.55 per cent higher at $78.47 a barrel at the close of trading on Friday, while West Texas Intermediate, the gauge that tracks US crude, was up 2.87 per cent at $73.86 a barrel. On Thursday, Brent settled 0.17 per cent lower at $76.52 a barrel while WTI was up 0.01 per cent at $71.80. "The rally over the last week or so from the range lows has been quite strong and backed by momentum – as well as fresh cuts from Saudi Arabia and Russia – and despite being pushed back from the recent highs over the last couple of days, it's continued to drive higher in a way that could see the upper boundary buckle," said Craig Erlam, senior market analyst at Oanda. "Yesterday's ADP [alternative delivery procedure] number appeared to wipe out any momentum that had built up but a rally late in the day saw it end the session in the green and come within a whisker of June 21 peak. "A failure to overcome that could further confirm the continuation of the gradual consolidation we've seen over the last couple of months, whereas a break above could be a very bullish signal." US crude inventories, an indicator of fuel demand, fell by 1.5 million barrels last week to 452.2 million barrels, the US Energy Information Administration said on Thursday. Analysts polled by Reuters were expecting a drop of a million barrels. Total petroleum stocks fell by 2.5 million barrels in the week that ended on June 30, while distillate inventories decreased by a million barrels, EIA data showed. Meanwhile, Moody’s Analytics has lowered its crude oil price forecast by $4 a barrel for the second and third quarters of 2023. It now expects Brent to average about $83 a barrel in 2023, down from its previous forecast of $85.45. “It has become clear that Russia will be able to evade and bypass the massive oil sanctions levied upon them by western powers for its invasion of Ukraine,” Moody’s Analytics said. “Incredibly, Russia’s oil exports are now higher than they were before the invasion of Ukraine.” Russian oil exports hit 8.3 million barrels per day in April, the highest since Moscow’s invasion of Ukraine last year, the International Energy Agency said in a report in May. Moody’s Analytics also raised its estimates for Russian oil exports by 500,000 bpd and said that risks were “weighted to the upside”. “The surprising strength of Russian oil exports has left the oil market oversupplied.” Earlier this week, Saudi Arabia, the world’s largest oil exporter , said it would extend its voluntary production cut of a million bpd, which was initially announced for July, for another month. Russia is also cutting its oil exports by 500,000 bpd in August on top of the output reductions that have already been announced, state news agency Tass reported on Monday. On Wednesday, the kingdom’s Energy Minister Prince Abdulaziz bin Salman said Opec+ would continue to pursue efforts to stabilise the oil market and would do “whatever is necessary”. Speaking at the Opec Seminar in Vienna, he said the market would not be left “unattended” and added that the output policy announced on June 4 was “too big for people to comprehend”. Last month, the alliance of 23 oil-producing countries agreed to stick to its existing output policy until the end of 2024. The group has total production curbs of 3.66 million bpd, or about 3.7 per cent of global demand, in place, including a 2 million bpd reduction agreed last year and voluntary cuts of 1.66 million bpd announced in April. Energy traders are watching a tug-of-war between bullish bets that stem from expectations that Opec+ will keep this market tight and as global recession fears grow,” said Edward Moya, senior market analyst at Oanda. “Oil will struggle here if global economies continue to drag here.” This aim of the latest production cuts is to stabilise oil prices by establishing a price floor, rather than being perceived as Opec+ reacting to weak demand, Ehsan Khoman, head of commodities, ESG and emerging markets at MUFG, said in a research note. “These cuts accentuate coherence and consistency within the alliance while equally being precautionary and proactive, in our view.”

Oil posts second weekly gain on fall in US crude stocks and output cuts

Moody’s Analytics lowers crude price forecast by $4 per barrel for the second and third quarters