Oil prices fell on Friday but posted a third weekly gain for the first time since April amid supply disruptions in Africa and the prospect that easing inflation in the US will drive crude demand in the world’s biggest economy.
Brent, the benchmark for two thirds of the world’s oil, settled 1.83 per cent lower at $79.87 a barrel on Friday. West Texas Intermediate, the gauge that tracks US crude, was down 1.91 per cent at $75.42 a barrel.
On Thursday, Brent closed 1.6 per cent higher at $81.36 a barrel while WTI was up 1.5 per cent at $76.89.
Oil prices have made "tremendous gains over the last couple of weeks and could still add to that over the coming sessions", Craig Erlam senior market analyst, at Oanda, said.
Brent crossed the $80 per barrel-mark for the first time since April on Thursday, as a sharp cooling in US inflation sparked hopes that the US Federal Reserve will ease off from further aggressive interest rate increases.
The US consumer price index rose 3 per cent year-on-year in June, the smallest increase since March 2021, and down from 4 per cent in May, data released by the Labour Department on Wednesday showed.
Oil prices were also buoyed by supply disruption in Libya as protesters shut in 60,000 barrels per day of exports from the El Feel field due to the arrest of a former finance minister. A number of other oil fields were also shut by the protesting tribesmen in the country.
Separately, Shell has also suspended operations of loadings Nigerian crude oil due to a potential leak at a terminal.
The ongoing unrest in Libya alone could disrupt more than 250,000 barrels of oil per day from the market, Reuters said, citing ANZ Research.
“Crude futures were consolidating early Friday after a third straight day of gains to 12-week high settles as optimism over the Federal Reserve pausing after the next rate hike continued to grow and the US dollar was hammered down again,” Singapore-based oil markets consultancy Vanda Insights said in a research note.
“Crude [also] found support from reports of production outages in Libya.”
Crude prices have rallied in recent weeks after Saudi Arabia, the world’s largest crude exporter, said it would extend its voluntary output cut of a million bpd until August. Russia is also cutting oil supplies by 500,000 bpd next month on top of the output reductions that have already been announced by Opec+.
The Opec+ alliance of 23 oil producing countries is keeping its current production curbs in place 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 on last year and voluntary cuts of 1.66 million bpd announced in April.
On Thursday, Opec raised its oil demand growth forecast for this year based on higher fuel consumption in China, the world’s second-largest economy and top crude importer.
Global oil demand is now projected to grow by 2.4 million bpd in 2023, up from a previous estimate of 2.3 million bpd, the group said in its monthly oil market report.
The group, which released its 2024 forecast for the first time, said it expects global crude demand next year to grow by a “healthy” 2.2 million bpd to an average 104.25 million bpd.
Oil demand in the US, the world’s largest economy, is projected to reach pre-pandemic levels, supported by a recovery in jet fuel demand and a rise in gasoline consumption, Opec said.
However, the International Energy Agency has lowered its 2023 oil demand growth forecast for the first time this year, citing macroeconomic headwinds and a deepening manufacturing slump.
World oil demand is expected to grow by 2.2 million bpd this year, lower than a previous forecast of 2.4 million bpd growth, the Paris-based agency said in its monthly oil market report on Thursday.
Crude oil has rallied past its 200-day moving average – a price stability and forecast gauge – and is consolidating around that level, Ipek Ozkardeskaya, analysts at Swissquote Bank, said.
“Supply shortages in Libya and Nigeria are pushing price higher but the IEA says that global oil demand won’t rise as much as they previously forecasted … [which] could help bring the bears back to the market,” she said.
Mr Erlam of Oanda said the break above $80 per barrel mark was "very significant after multiple efforts by Saudi Arabia and its allies" to support the price to "more sustainable levels".
"It could face an interesting test around $83-$84 [per barrel] if it keeps rallying, while a move lower will draw attention back to $80 and whether we'll get that confirmation of the initial breakout," he added.
Crude prices have also found support by the recent decline in the US dollar, which is expected to persist after the greenback fell to its lowest level in more than a year on Wednesday.
“The US dollar index slipped below the 100 mark. This is the first time the … index has traded below this level since April 2022, as the Federal Reserve is not seen getting more aggressive than this when inflation is slowing,” Ms Ozkardeskaya said.
