Oil rebounds but bears persist in seventh consecutive week

Business a.m

Crude oil prices ended the closing session of the week with a gain of over 2 per cent, as a report from the U.S. Energy Information Administration showed robust demand growth, buoying prices in the short term. However, both the Brent and WTI benchmarks still closed lower for the week, marking their seventh straight weekly decline, the longest streak in half a decade. This comes as concerns about oversupply in the oil market remain a drag on prices.

Brent crude futures, the international benchmark, ended the week at $75.84 a barrel, a gain of $1.79, or 2.4 per cent, from the previous close. The U.S. benchmark, West Texas Intermediate (WTI) crude futures, settled at $71.23 a barrel, up $1.89, or 2.7 per cent. The week ended with a 3.8 per cent decline in both benchmarks, following a seven-week losing streak.

Adding to the bearish sentiment, Chinese customs data released this week showed a decline in crude oil imports of 9 per cent in November compared to the same period last year. The drop can be attributed to a combination of factors, including high inventory levels, weak economic indicators and a decline in orders from independent refiners. These factors point to a slowdown in demand, which could weigh on crude oil prices going forward.

Despite the downward pressure on prices, Friday’s gains may be a signal that the market has reached a temporary bottom. Phil Flynn, analyst at Price Futures Group, said that investors should approach the market with caution, but the likelihood of further significant declines in prices is now reduced. Flynn also suggested that the market may be stabilising at current levels, although caution is still advised given the uncertainty around the economic outlook.

Meanwhile, Saudi Arabia and Russia,the world’s two largest oil exporters, called on all members of the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) to comply with the recently agreed upon production cuts. The message came just days after the group held a contentious meeting, in which some members were reluctant to agree to cuts.

The group agreed to reduce production by a total of 2.2 million barrels per day (bpd) for the first quarter of 2023. However, concerns remain that some members may not stick to their commitments, which could lead to an oversupplied market.