Investing.com -- Crude prices were on track to their first weekly gain in three, helped by higher refinery demand and a rate cut in China, the world’s number one destination for oil.
Offsetting some of the optimism among oil longs was the continuous reminder by officials at the Federal Reserve that the central bank wasn’t done with its own rate hikes despite a pause in June.
Fed projections this week signaled two more hikes of a quarter percentage point each before the year-end. Other major central banks are tightening as well, with the Bank of England eyeing a quarter-point increase of its own, after the European Central Bank ramped up rates to 22-year highs on Thursday.
"We're going to be going from Fed speaker to Fed speaker, and data point to data point," Phil Flynn, analyst at Price Futures Group and a prominent oil bull, said in comments carried by Reuters on Friday.
New York-traded WTI crude was up 44 cents, or 0.6%, to $71.06 per barrel by 13:10 ET (17:10 GMT). Week-to-date, the U.S. crude benchmark was up 1.3% after a 3.5% tumble over two prior weeks.
London-traded Brent rose by 35 cents, or 0.5%, to $76.02. For the week, the global crude benchmark was up 1.9%, after a 3% slump over two prior weeks.
It has been a swing of a time — literally — for oil which began the week with a 4% drop on Monday, driven by recession concerns. It then witnessed a 3% rebound Tuesday, aided by a Chinese rate cut.
By Wednesday, oil slid 2% on a massive jump in U.S. crude inventories and a hawkish stance adopted by the Fed despite its hold on June rates. The next day, crude prices were up more than 3% on bullish Chinese refinery data, before drifting again in Friday’s trade.
Some expect oil prices to see support later in the year from production cuts announced by Saudi Arabia. Analysts at UBS said on Thursday they expect a supply deficit of around 1.5 million barrels daily in June and more than 2M in July.
“These are small positives but it could be enough to stop crude from making fresh lows for the year,” said Craig Erlam, analyst at online trading platform OANDA.
Brent’s low thus far for 2023 has been $70.12, against WTI’s $63.70.
The optimism of oil longs does not appear to fully factor in Russia’s unsupervised sales of oil, mostly done at or near the $60-a-barrel cap set by the G7 in accordance with sanctions imposed against Moscow over the Ukraine invasion.
Russia’s state energy giant Rosneft is close to striking long-term deals to sell substantial supplies of oil, a sign that Moscow can continue to count on petroleum exports to fund its war on Ukraine, the Wall Street Journal reported on Thursday.
Notwithstanding that, Russia’s Energy Minister Nikolai Shulginov said on Friday it was "realistic" to expect crude prices to return to around $80 per barrel, citing falling Russian oil and gas condensate production to around 20M tonnes (400,000 barrels per day) this year as one reason. Moscow’s forecasts on oil have largely been greeted with more than an ounce of skepticism by the market.