Oil prices rose nearly 2% on Friday as Iraq voiced support for OPEC+ oil cuts ahead of a meeting in two weeks and some speculators closed large short positions ahead of weekend uncertainty.
Still, prices stabilized with weekly losses of 4%, marking the third consecutive weekly decline.
The week started with an almost record short position, and some short positions were opened towards the end of the week.
In addition to Iraq’s comments, it was important that Saudi Arabia and Russia also confirmed this week that they would continue their oil production cuts until the end of the year.
Energy companies in the US reduced the number of oil rigs operating for the second week in a row to the lowest level since January 2022, Baker Hughes said. This does not bode well for demand expectations.
Brent futures rose $1.42, or 1.8%, to $81.43 a barrel, while West Texas Intermediate (WTI) crude gained $1.43, or 1.9%, to settle at $77.17.
Brent and WTI recorded their third consecutive weekly losses for the first time since May, but both indicators have technically moved out of oversold territory.
Fears of production disruptions linked to the conflict in the Middle East have been replaced by concerns about demand.
Weak economic data from China this week has raised concerns about declining demand. Refineries in China, the largest crude oil buyer of Saudi Arabia, the world’s largest exporter, requested less product for December.
Consumer confidence in the US fell for the fourth consecutive month in November, and household inflation expectations rose again.
Judging by Jerome Powell’s comments on Thursday, the Fed isn’t yet ready to announce whether it’s done raising rates.
Higher interest rates slow economic growth, reducing demand for oil.
According to the UK Office for National Statistics, the stagnating economy in Britain failed to grow in the July-September period but prevented a recession.
The Organization of Petroleum Exporting Countries and its allies, including Russia, and OPEC+, will meet on November 26. Iraq’s oil ministry said Baghdad was committed to the OPEC+ agreement on setting production levels.
The prospect of Saudi Arabia extending its production cut into the first quarter of 2024 has certainly increased given market concerns about Chinese demand and the broader macro outlook.
If prices continue to fall, it is very possible that OPEC+ will cut supply further.