Oil futures steadied Friday, but were on track for big weekly losses as worries about the economic outlook stoked demand worries.
Price action
-
West Texas Intermediate crude for June delivery
CL.1,
+0.56% CLM23,
+0.56%
edged down 4 cents, or less than 0.1%, to $77.33 a barrelon the New York Mercantile Exchange, leaving the U.S. benchmark on track for a 6.2% weekly fall. -
June Brent crude
BRN00,
+0.53% BRNM23,
+0.53% ,
the global benchmark, was off 5 cents, or 0.1%, at $81.04 a barrel on ICE Futures Europe, leaving it down 6.1% for the week. -
Back on Nymex, May gasoline
RBK23,
+0.97%
rose 0.6% to $2.603 a gallon, while May heating oil
HOK23,
+0.23%
edged down 0.1% to $2.492 a gallon. -
May natural gas
NGK23,
-1.02%
dropped 1.7% to $2.211 per million British thermal units.
Market drivers
Both WTI and Brent posted their lowest closes of the month on Thursday, giving back a chunk of the gains scored in early April after Saudi Arabia and its OPEC+ allies announced cuts of around 1.15 million barrels a day beginning in May and running through the end of the year, while Russia said it would extend cuts of 500,000 barrels a day through year-end.
Oil has stumbled the past week, with analysts partly blaming worries that ongoing monetary policy tightening by the Federal Reserve and other major central banks will spark a sharp global economic slowdown, offsetting previous optimism over China’s economic recovery following the lifting of strict COVID-19 curbs in late 2022.
In addition to skepticism over Chinese demand, reports that Russian crude shipments continue despite sanctions and embargoes have also weighed on oil prices, said Carsten Fritsch, commodity analyst at Commerzbank, in a Friday note.
Reuters on Thursday reported that oil loadings from Russia’s western ports in April were on track to be the highest since 2019, at more than 2.4 million barrels a day.
“In the short term, the orientation phase against the backdrop of mixed economic prospects in the Western industrialized countries could persist: after all, the market is (still) amply supplied,” Fritsch wrote. “In our opinion, however, the market is too complacent in the medium term: when production in Saudi Arabia and a number of other OPEC countries is scaled back from May, the market will be noticeably undersupplied again.”
Daily oil supply in the second half of 2023 is likely to be around 2 million barrels shy of demand, he said, which means commercial stocks in developed countries, which have only just returned to “normal” levels will likely see a renewed decline.
