Oil prices posted their fourth straight weekly gain, up nearly 2% on Friday, supported by growing evidence of supply shortages in the coming months and rising tensions between Russia and Ukraine that could further hit supply. Oil supply is expected to contract in the second half of 2023.
Brent crude futures were up $1.43, or 1.8%, to $81.07 a barrel, gaining about 1.2% weekly. West Texas Intermediate crude (WTI) rose $1.42, or 1.9%, to $77.07 a barrel, its highest level since April 25. WTI gained about 2% during the week.
The oil market is slowly starting to price up in the impending supply crunch. Investors welcomed the stimulus measures in China. Global supply is starting to contract and this could accelerate significantly in the coming weeks. The increased risk of war can also affect prices.
Russia-Ukraine tension supports oil prices. Russia hit Ukraine’s food export facilities for the fourth time in a row on Friday and has made a vessel arresting exercise in the Black Sea, escalating tensions in the region since Moscow withdrew from the UN-brokered safe sea corridor agreement this week.
Closing the grain corridor could hit the supply of biofuels blended with ethanol and petroleum products at a time when global grain markets are already contracting, causing refineries to use more crude oil.
The seizure of ships could add risk to exports of oil and other goods in the region. The Kremlin on Friday said that Ukraine’s actions pose a danger to civilian shipping in the Black Sea and that the situation around Russia’s exports needs to be analyzed.
U.S. crude inventories fell last week amid a surge in crude exports and higher refinery use, the Energy Information Administration (EIA) said on Wednesday. Earlier on Monday, the EIA had predicted that US shale and gas production would decline for the first time this year in August, raising concerns about supply shortages.
Meanwhile, energy services firm Baker Hughes said US energy firms cut their oil rigs by seven this week. It was the biggest cut since early June. U.S. oil rig counts are at 530, the lowest since March 2022, an early indicator of future production.
UAE Energy Minister Suhail al-Mazrouei said that OPEC+’s current actions to support the oil market are sufficient for now.
Chinese officials have unveiled plans to help boost sales of cars and electronics in a move welcomed by investors, hoping it will revive the country’s stagnant economy.
Purchasing manager surveys said shifting global demand will be key for investors.
