Oil prices rise as supply concerns outweigh demand worries
According to Reuters, oil prices increased on Friday after falling to their lowest levels since February in the previous session as supply deficit worries outweighed concerns over a slowing in gasoline consumption.
Brent crude had risen 55 cents, or 0.6 percent, to $94.67 per barrel by 0630 GMT, while US West Texas Intermediate crude had risen 65 cents, or 0.8 percent, to $89.19 per barrel.
This week, the market worried about how inflation would affect demand and economic development, which put pressure on oil prices. However, indications of restricted supply helped to keep prices in check.
ANZ Research analysts stated that “OPEC’s meager supply rise underscores the limited ability the market has to tolerate additional shortages.”
OPEC+, often known as the Organization of the Petroleum Exporting Countries, intends to increase its daily target for oil production by 100,000 barrels in September. According to OPEC figures, the increase is one of the smallest since quotas were instituted in 1982.
The world’s crude oil markets continued to be firmly in backwardation, a situation in which current prices are higher than those in upcoming months, signalling a shortage of supplies.
With the EU sanctions prohibiting seaborne imports of Russian crude and oil products slated to go into force on December 5, supply issues are anticipated to increase as winter approaches.
The crucial question is whether Middle Eastern producers will reroute their barrels to Europe to cover the gap left by the EU’s suspension on seaborne Russian imports, according to RBC analyst Michael Tran. One of the most important things to watch for the rest of the year will be how this Russian oil sanctions policy plays out, noted Tran.
Price growth was temporarily halted by indications of an economic slowdown. Concerns about a recession have grown after the Bank of England warned of a protracted downturn after raising interest rates by the most since 1995.
If commodities are not pricing in an impending economic downturn, they may be getting ready for a period of “stagflation,” in which the jobless rate increases and inflation remains high, according to CMC Markets analyst Tina Teng.
Investors are paying close attention to the US employment data that will be announced later in the day. Nonfarm payrolls are predicted to have climbed by 250.000 jobs, following a gain of 372,000 jobs in June.
Any indications of labour market strength could heighten concerns about the US Federal Reserve taking forceful action to control inflation.