Oil prices rose about a dollar a barrel on Friday on signs of slowing US output, but both crude benchmarks looked set to end their longest rally of 2023 on mounting concerns about global demand growth.
US West Texas Intermediate (WTI) crude futures were up $1.08, or 1.3%, to $81.47 a barrel at 1708 GMT, while the global Brent crude benchmark rose 81 cents, or 1%, to $84.93 a barrel.
Both benchmarks pushed higher on Friday after industry data showed that the US oil and natural gas rig count, an early indicator of future output, fell for a sixth week in a row.
A slump in US production could exacerbate an anticipated supply tightness through the rest of this year.
Those concerns, spurred on by output cuts from the Organisation of the Petroleum Exporting Countries (OPEC) and allies, helped oil prices gain for seven straight weeks since June. Brent crude gained about 18% and WTI gained 20% over the seven weeks ended August 11.
This week, however, oil prices are set to fall 2% as a worsening property crisis in China has added to concerns about the country’s sluggish economic recovery and reduced investors’ appetite for risk across markets.
“Concerns for investors remain focused on the tension between slowing global growth and still-tight global supplies,” said Rob Haworth, Senior Portfolio Manager at US Bank Asset Management.
“Prices are likely to remain range bound for now,” Haworth said, adding that demand is in question for investors worried by the weak data from China.
Concern is also mounting that the US Federal Reserve has not finished raising interest rates to tackle inflation. Higher borrowing costs can impede economic growth and in turn reduce overall demand for oil.
Oil benchmarks were further depressed by seasonal demand weakness heading into the autumn, said Jay Hatfield, CEO of Infrastructure Capital Management.
Published in The Express Tribune, August 19th, 2023.
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