By Adedapo Adesanya
The crude oil market climbed about 3 per cent to close Friday’s trading session on a high note as supply concerns and technical buying outweighed fears of further interest rate hikes.
Brent futures rose $1.95 or 2.6 per cent to settle at $78.47 a barrel, while US West Texas Intermediate (WTI) crude futures appreciated by $2.06 or 2.9 per cent to trade at $73.86 per barrel.
That was the highest close for Brent since May 1 and WTI since May 24, as both benchmarks ended up about 5 per cent for the week.
Top oil exporters, Saudi Arabia and Russia, announced fresh output cuts this week, bringing total reductions by the Organisation of the Petroleum Exporting Countries (OPEC) and its allies (OPEC+) to around 5 million barrels per day (bpd) or about 5 per cent of global oil demand.
Market analysts noted that the OPEC+ production cuts are expected to tighten the market and drive supply deficits in the second half of 2023, which will, in turn, support higher oil prices.
Support also came as the US Dollar fell to a two-week low after data showed job growth in the US was lower than expected.
However, it is still strong enough to likely lead the US Federal Reserve to resume raising interest rates later this month as it has signalled.
A weaker Dollar makes crude cheaper for holders of other currencies, which could boost oil demand.
According to the CME Group Inc’s FedWatch Tool, the probability that the Fed will increase interest rates by 25 basis points at its July 25-26 meeting is now around 95 per cent, up from 92 per cent just prior to the data coming out.
Higher borrowing costs could slow economic growth and reduce oil demand.
OPEC will likely maintain an upbeat view on oil demand growth for next year, Reuters reported, noting that this could happen when it publishes its first outlook later this month.
There could also be a slowdown from this year but still an above-average increase, sources close to OPEC told the news agency.
OPEC’s forecast for 2024 will likely be lower than the growth it expects for this year of 2.35 million barrels per day, or 2.4 per cent, “an abnormally high rate as the world moves out of the coronavirus pandemic.”
OPEC originally predicted demand growth in 2023 of 2.7 million barrels per day in its first forecast published in July 2022, later revising it down to 2.35 million barrels per day.
OPEC is expected to publish its first demand forecast for 2024 in its monthly report on July 13.
Dipo Olowookere