Oil gains for the week as supply cuts balance demand concerns

NEW YORK: Oil rose on Friday and posted a weekly gain, as higher Chinese demand and OPEC+ supply cuts lifted prices, despite expected weakness in the global economy and the prospect for further interest rate hikes.

Brent crude gained 94 cents to settle at $76.61 a barrel. US West Texas Intermediate (WTI) crude rose $1.16 to $71.78.

Brent posted a weekly gain of 2.4% and WTI rose 2.3%.

Oil has gained this week on hopes of growing Chinese demand. China’s refinery throughput rose in May to its second-highest total on record and Kuwait Petroleum Corp’s CEO expects Chinese demand to keep climbing during the second half.

Also supporting crude are the voluntary output cuts implemented in May by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, plus an additional cut by Saudi Arabia in July.

Russian Energy Minister Nikolai Shulginov said it was “realistic” to reach oil prices of around $80 per barrel, Russian state news agencies reported.

Shulginov also said Russian oil and gas condensate production is expected to fall by around 20 million tonnes (400,000 barrels per day) this year, reiterating Russia’s expectations.

In Iran, crude exports and oil output have hit new highs in 2023 despite US sanctions, according to consultants, shipping data and a source familiar with the matter, adding to global supply when other producers are limiting output.

US oil rigs fell by four to 552 this week, their lowest since April 2022, while gas rigs fell by five to 130, their lowest since March 2022, energy services firm Baker Hughes Co said.

Capping oil price gains was the prospect of rising interest rates, which could slow economic growth.

The Bank of England is set to raise interest rates by a quarter of a percentage point next week. The European Central Bank lifted rates to a 22-year high on Thursday and the US Federal Reserve signalled at least a half of a percentage point increase by year-end.

Investors have been closely watching interest rates and commentary from Fed members.

“We’re going to be going from Fed speaker to Fed speaker, and data point to data point,” Phil Flynn, an analyst at Price Futures Group, said of oil prices.

Money managers cut their net long US crude futures and options positions by 13,191 contracts to 73,273 in the week to June 13, the US Commodity Futures Trading Commission (CFTC) said.