Oil Notches Weekly Gain Despite Slip as Bulls Feast on Supply-Shortage Bets
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By Yasin Ebrahim
Investing.com — U.S. crude oil prices slipped Friday, amid China-infused demand concerns, but ended the week higher on bets that a supply crunch is unlikely to be avoided ahead of a looming European ban on Russian crude imports and deeper OPEC output cuts.
On the New York Mercantile Exchange crude futures fell about $1.18 to settle at $87.90 a barrel, while on London’s Intercontinental Exchange, Brent slipped $1.19 to settle at $95.77 a barrel. Both benchmarks, however, ended the week up more than 3%.
Beijing doubled down on its zero-Covid policy, extending lockdown to further cities across China as coronavirus cases topped 1,000 for the third day in a row.
The increased lockdown measures from the world’s largest energy importer are expected to further stifle travel activity, fueling further worries about energy demand at a time when many are wary about the impact of a slowing global economy.
Despite the muddied outlook on demand, investors are betting that the U.S.-led move to release emergency oil stockpiles isn’t likely to plug the supply gap amid OPEC and its allies’ plans to cut production sharply next month.
Last week, President Biden said that the U.S. would release a further 15 million barrels of oil from the United States strategic reserve by December, to further drive down fuel prices. The move would fulfill the president’s earlier plan — announced in March — to release a total of 180 million barrels.
OPEC production survey data, slated to be released from Bloomberg and Reuters next week, is likely to show that output has fallen “marginally, in line with the OPEC+ decision, before it is reduced considerably more sharply in November,” Commerzbank said.
As well as the OPEC+ cuts, supply will be held hostage by the geopolitical developments as European countries are closing in on a Dec. 5 deadline when sanctions barring the purchase of Russian crude are set to kick in.
“[T]he oil market is likely to tighten as a result, especially since the EU’s oil embargo that will come into force in early December should likewise drive down the supply of oil from Russia,” Commerzbank added. “We therefore see Brent well supported at its current level of around $96 per barrel.”
