By Adedapo Adesanya
Oil prices climbed on Friday on expectations that the Organisation of the Petroleum Exporting Countries and allies (OPEC+) will discuss output cuts at a meeting on September 5.
This happened even though concern over China’s COVID-19 curbs and weakness in the global economy continued to limit gains, causing the price of Brent crude futures to rise by $1.73 or 1.9 per cent to $94.09 per barrel, with the US West Texas Intermediate (WTI) crude futures advancing by $1.69 or 2 per cent to $88.30 per barrel.
Both benchmarks slid 3 per cent to two-week lows in the previous session and on a week-on-week basis, Brent recorded a loss of nearly 7 per cent while WTI lost about 5 per cent.
OPEC+ are due to meet on Monday against a backdrop of expected demand declines, though top producer Saudi Arabia says supply remains tight.
Analysts warned that a deal has been a big downside risk for oil prices recently; something Saudi Arabia sought to counter with warnings of production cuts from the alliance.
OPEC+ this week revised market balances for this year and now sees demand lagging supply by 400,000 barrels per day against the 900,000 barrels per day forecast previously. The producer group expects a market deficit of 300,000 barrels per day in its base case for 2023.
Meanwhile, investors remain worried about the impact of the latest COVID-19 restrictions in China.
Chinese tech hub Shenzhen has gone back to into lockdown, extended curbs on public activities, and shut down public transport on Friday as cities across China continue to battle fresh COVID-19 outbreaks that have dampened the outlook for economic recovery.
Authorities in Beijing have directed that residents in six districts comprising the majority of the city’s population of 18 million be tested twice for COVID-19 over the weekend with employees required to work from home.
G7 finance ministers agreed on Friday to impose a price cap on Russian oil but provided few new details to the plan aimed at curbing revenue for the war in Ukraine while keeping crude flowing to avoid high prices.
In the instance that the strict lockdowns and curfews successfully slow down the world’s largest importer’s latest COVID-19 outbreak, it will have a negative impact on Chinese consumer demand and manufacturing output.
Modupe Gbadeyanka