Oil Dips but Posts Weekly Gain on Solid 2024 Demand Outlook.
Oil futures prices settled slightly lower on Friday, influenced by a survey showing weakening U.S. consumer sentiment. Despite this, prices rose 4% over the week as investors considered strong demand forecasts for crude oil and fuel in 2024.
Brent crude futures fell by 13 cents, closing at $82.62 a barrel, while West Texas Intermediate (WTI) U.S. crude futures dropped by 17 cents to $78.54. However, both benchmarks posted nearly a 4% gain for the week, marking their highest weekly rise in percentage terms since April.
The decline in prices was partly due to a survey revealing that U.S. consumer sentiment had deteriorated to a seven-month low in June. “The data came in way lower than expected,” commented Bob Yawger, director of energy futures at Mizuho. “That implies the average consumer doesn’t have confidence that the economic situation is improving.” Nonetheless, the losses were limited by strong demand forecasts.
The U.S. Energy Information Administration (EIA) slightly increased its oil demand growth estimate for 2024, while the Organization of the Petroleum Exporting Countries (OPEC) maintained its forecast for robust growth of 2.2 million barrels per day (bpd).
Conversely, the International Energy Agency (IEA) reduced its demand growth forecast to under 1 million bpd. Despite differing forecasts, all three agencies predict a supply deficit at least until the beginning of winter, as highlighted by Commerzbank analysts.
Additionally, the U.S. Federal Reserve kept interest rates unchanged this week, and investors believe rate cuts are unlikely before December. “In view of the still uncertain economic outlook for the major economic regions, a further price increase is not to be expected for the time being,” said Commerzbank analyst Barbara Lambrecht.
The U.S. active oil rig count, an early indicator of future output, fell by four to 488 this week, its lowest since January 2022, according to energy services firm Baker Hughes. Meanwhile, Russia pledged to meet its output obligations under the OPEC+ pact after admitting it exceeded its quota in May.
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Prices had dipped the previous week after OPEC and its allies announced plans to phase out output cuts starting from October. “No matter how many times it promises to make up for poor compliance at a future date, the market just sees more oil and an agreement that might just possibly unravel,” said PVM analyst John Evans.
Market focus also turned to Gaza ceasefire talks, which could alleviate concerns about potential disruption to oil supply from the region.
Meanwhile, money managers increased their net long U.S. crude futures and options positions in the week leading to June 11, according to the U.S. Commodity Futures Trading Commission (CFTC).
