Crude Oil Poised for Second Consecutive Weekly Increase Amidst Shrinking Supply Prospects
Oil prices continued their upward trajectory on Friday, poised for a second consecutive weekly gain. This surge was underpinned by escalating geopolitical tensions in the Middle East, concerns surrounding a tightening supply, and optimistic expectations for demand growth amidst the backdrop of economic recoveries.
Brent crude saw an increase of 26 cents, or 0.3%, reaching $90.91 per barrel by 1252 GMT, while U.S. West Texas Intermediate crude hovered at $86.65 per barrel, up by 6 cents or 0.1%.
Both benchmarks settled on Thursday at their highest levels since October, reflecting the market’s response to the unfolding dynamics.
The week’s gains of more than 4% for Brent and WTI were largely attributed to Iran’s pledge of retaliation against Israel following an attack that resulted in the death of high-ranking Iranian military personnel. The uncertainty surrounding the nature of this potential retaliation has contributed to market unease and volatility.
Despite Israel not claiming responsibility for the attack on Iran’s embassy compound in Syria earlier in the week, tensions remain high in the region.
Furthermore, ongoing drone attacks on Russian refineries by Ukraine have reportedly disrupted over 15% of Russia’s refining capacity, impacting fuel output significantly.
The recent meeting of the Organization of the Petroleum Exporting Countries (OPEC) and its allies, collectively known as OPEC+, maintained their existing oil supply policy while urging member nations to adhere more closely to output cuts. This, coupled with the potential for further clampdowns on non-compliance, suggests a potential decrease in output in the second quarter, tightening the market and likely leading to inventory drawdowns.
On the demand side, U.S. job growth surpassed expectations in March, accompanied by a steady rise in wages, indicating robust oil demand. However, this positive economic data could potentially delay anticipated interest rate cuts by the U.S. Federal Reserve later in the year.
JPMorgan analysts highlighted solid global oil demand growth of 1.4 million barrels per day (bpd) in the first quarter, with March’s oil consumption estimated to have averaged 101.2 million bpd, slightly exceeding published estimates.
Overall, the combination of geopolitical tensions, supply concerns, and optimistic demand outlooks continues to drive oil prices upward, with the market closely monitoring developments for further cues.
