Oil futures move higher on Friday, contributing to a gain for the week, which would be their first in three weeks as traders continue to struggle with an uncertain demand outlook.
Price action
-
West Texas Intermediate crude for July delivery
CL00,
+0.89% CL.1,
+0.62% CLN23,
+0.62%
rose 32 cents, or 0.5%, to $70.94 a barrel on the New York Mercantile Exchange, with prices for the front-month contract on track for a weekly rise of 1.1%, FactSet data show. -
August Brent crude
BRN00,
+0.44% BRNQ23,
+0.44% ,
the global benchmark, was up 28 cents, or 0.4%, at $75.95 a barrel on ICE Futures Europe, headed for a 1.6% weekly gain. -
Back on Nymex, July gasoline
RBN23,
+0.37%
rose 0.2% to $2.647 a gallon, while July heating oil
HON23,
+2.77%
was up 1.5% at $2.5167 a gallon. Gasoline was up over 2% for the week, while heating oil has gained 6.6%. -
July natural gas
NGN23,
+4.07%
rose 1.6% to $2.575 per million British thermal units, set for a weekly jump of over 14%.
Market drivers
Crude prices were heading on Friday for a weekly rise following back-to-back weekly declines, after finding support in Thursday’s session when The Wall Street Journal reported that Chinese authorities were preparing aggressive economic stimulus measures.
Disappointment in the economic rebound by the world’s second-largest energy consumer has been a weight on crude prices in 2023, but not the only factor pressuring prices this year.
Read: Commodity market performance so far this year points to an economic recession, but a rise for industrial metals
“There are a number of key factors behind lower oil prices so far this year: a weaker-than-expected demand rebound from China, stronger-than-expected supply from Russia, rising U.S. crude inventories and increasing demand concerns — particularly in the western hemisphere,” said Matt Smith, lead oil analyst, Americas, at Kpler.
Given all of that, OPEC+, and particularly Saudi Arabia, are concerned for the rest of the year, “hence their production cut announced in early April, followed swiftly by the surprise reduction in Saudi output announced in early June, he told MarketWatch. The promise of a 1 million barrel per day cut from Saudi Arabia next month “appears the meteoric effort needed to hold prices from falling below $70” a barrel.
Analysts said crude still faces skepticism over the demand outlook.
“Concerns about demand continue to predominate on the oil market: the prospect of further Fed rate hikes that could put the brakes on demand in the U.S., which is still the biggest oil consumer country, has been weighing on sentiment, as has an unexpectedly sharp rise in U.S. oil stocks,” said Barbara Lambrecht, commodity analyst at Commerzbank, in a note.
The Energy Information Administration on Wednesday reported that U.S. commercial crude inventories rose by 7.9 million barrels for the week ending June 9. The EIA data also included an upward adjustment of 1.937 million barrels a day to petroleum supplies. Multiplied by 7 days, that’s about 13.56 million barrels added to petroleum stockpiles.
Traders have brushed off a warning though from the International Energy Agency this week that the market is set to be significantly undersupplied in the second half of the year. “It seems that the market needs more ‘hard’ facts to confirm any tight supply on the market,” Lambrecht wrote.
Natural-gas futures, meanwhile, have rallied. They ended sharply higher Thursday after the EIA reported a smaller-than-expected climb of 84 billion cubic feet in U.S. natural-gas supplies in storage for the week ending June 9.
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