By Adedapo Adesanya
Crude oil prices rose 2 per cent after the market found that an immediate Saudi Arabian oil output boost was not expected soon following the visit of United States President Joe Biden.
As a result, the Brent crude rebounded to above $100 per barrel at the end of a very volatile week as it rose by $2.06 or 2.1 per cent to $101.16 per barrel, with the US West Texas Intermediate (WTI) crude growing by $1.81 or 1.9 per cent to $97.59 a barrel.
Oil was still down for the week after heavy selloffs in the previous sessions. Brent lost 5.5 per cent in its third weekly drop, while WTI was down 6.9 per cent in its second weekly decline.
At one point during the week, oil prices were trading at the lowest levels since February 23, the day just before the Russian invasion of Ukraine.
The boost for the final session happened after President Biden’s visit to Saudi Arabia on Friday indicated that it will not result in a public announcement of an imminent production increase.
The US government said it doesn’t expect the Saudis to immediately raise oil supply to the market or even to announce a planned production increase.
The US will be eyeing the outcome of the next meeting of the Organisation of the Petroleum Exporting Countries and its allies, OPEC+ in August, after which the deal signed two years ago expires.
Analysts note that they might see production increases in both Saudi Arabia and the United Arab Emirates (UAE).
Libya also signalled more oil supply as the country’s National Oil Corporation (NOC) said it will resume after meeting groups that have blockaded the country’s oil facilities for months.
Lifting force majeure on production could mean a return of 850,000 barrels per day.
Meanwhile, pressures continue to mount on the demand side fueled by new COVID measures in China as Shanghai and some other cities have enacted fresh restrictions on businesses to broader lockdowns in an effort to control the spread of the latest coronavirus variant.
Higher-than-expected US inflation and overall market concerns that the aggressive rate hikes from the US Federal Reserve and other central banks would lead to a recession also haunted the market.
US policymakers said they favoured a rate increase of 75 basis points at its policy meeting this month, not the bigger increase traders had priced in after a report on Wednesday showed inflation was accelerating.
Concerns that the Fed might opt for a full 100 bps rate rise this month and weak economic data had led to Brent and WTI shedding more than $5 on Thursday.
Analysts, however, expect continued pressure on oil from concerns over the global economy.
A bearish US inventory report on Wednesday also contributed to the drop in oil prices in the middle of the week. Inventories increased in the US for the week to July 8, with builds in both crude and gasoline stockpiles and a drop in implied gasoline demand.
A strong US Dollar also weighed on oil prices this week.
Dipo Olowookere