On Friday, the price of oil increased, a day after falling to a four-month low and 5% to a new low the day before, on mounting concerns about expanding non-OPEC production and decreasing demand.
At 10:57 GMT, Brent futures increased by 80 cents, equivalent to nearly 1%, to $78.22 per barrel. West Texas Intermediate crude in the United States was at $73.66, an increase of 76 cents, or around 1%.
Over the past four weeks, the value of both benchmarks has decreased by approximately one-sixth, and prices are currently on track to fall for the fourth week in a row.
According to experts at Goldman Sachs, “Oil prices are down slightly this year despite demand exceeding our optimistic expectations.” The statement was made in a note. “Non-core OPEC supply has been much stronger than anticipated, partially offsetting OPEC cuts.”
The prompt monthly spreads for both futures have now flipped into contango, which is a structure that implies that prices in the immediate future are lower than those in the months to come when there is sufficient supply.
A sharp increase in crude stocks held in the United States and continued production at record levels were the leading causes of this week’s drop in oil prices. Signs of thawing demand in China also brought on concerns.
But the sharp decline on Thursday caused some experts to wonder if the selloff had been exaggerated, particularly in light of the increasing tensions in the Middle East that might disrupt oil supply and the United States’ commitment to implement sanctions on Iran for supporting Hamas.
A further component that contributed to a pessimistic outlook on Thursday was the rise in the number of Americans submitting new claims for unemployment benefits and the minor decrease in industrial output numbers.
“Poor numbers maybe, but not disastrous; however, it was enough to tip the balance, and carnage ensued with sell stops cascading with triggers,” according to PVM oil trader John Evans.
Now that the price of a barrel of Brent oil has fallen below $80, industry analysts anticipate that OPEC+, led by Saudi Arabia and Russia, will extend its voluntary cutbacks until 2024.
“It has become clearer that the oil balance for the remainder of this year is not as tight as initially expected,” according to analysts at ING in a note. “As things stand, the market is still expected to return to surplus in 1Q24.”