Oil Prices Rise Despite Demand Concerns
Despite an increase in oil prices on Friday, the market is expected to see a weekly loss due to ongoing worries about demand and indications of a global economic slowdown. Brent, a benchmark for a large portion of the world’s oil, was trading 1.28% higher at $79.70 per barrel at 9pm UAE time, while West Texas Intermediate, a gauge for US crude, was up 1.52% at $74.79 per barrel. According to Edward Moya, a senior market analyst at Oanda, “Oil is trying to rally but demand concerns are keeping the gains small.”
As China reopens its economy, oil prices have risen due to its status as the top oil importer. However, rising coronavirus infections in China and travel restrictions have led to concerns about economic activity and oil demand disruption. Craig Erlam, a senior market analyst at Oanda, expects these issues to be temporary and for an economic rebound in the second half of the year to lead to increased demand for crude and higher oil prices.
The International Monetary Fund has reduced its growth forecast for the world economy in 2023 due to the Ukraine conflict, broadening inflation pressures, and a slowdown in China. The fund projects the global economy to grow 2.7% this year, which is 0.2% lower than the July forecast. The Energy Information Administration’s data, which show that 7 million barrels were add to commercial storage in the week ending December 30, also weigh on oil prices. However, gasoline inventories fell by about 300,000 barrels, and distillate inventories, including diesel and heating oil, dropped by 1.4 million. The Opec+ supergroup of Saudi Arabia and Russia is cutting production by 2 million barrels per day due to demand concerns. Still, the group “could meet before June 4 for more output cuts, which may be sooner rather than later,” according to Tellurian.
