Oil Prices Rebound Slightly But on Track for Another Weekly Decline
After oil prices have been on a sharp downward trajectory over the past few weeks due to supply concerns and a noteworthy demand decline, benchmark futures rebounded notably on Friday and may continue that trend, considering the persisting geopolitical and macroeconomic issues.
Oil Prices Headed For Fourth Straight Week of Losses
Oil prices trended higher on Friday, marking a significant rebound from their decline to a 4-month low caused by weakening concerns and growing supply by non-OPEC producers.
Brent oil futures rose 1.33% to $78.45 a barrel on Friday, and the West Texas Intermediate (WTI) added 1.3% to $73.83. The rebound comes after both benchmarks lost more than 15% of their value over the past four weeks. Despite today’s gains, oil prices are headed for a fourth consecutive week of losses.
“Oil prices are down slightly this year despite demand exceeding our optimistic expectations. Non-core OPEC supply has been much stronger than expected, partly offset by OPEC cuts.”– analysts at Goldman Sachas wrote in their note.
The monthly spreads for both contracts have shifted to contango, a sign that near-term prices are lower than those in the future months, indicating a healthy supply in the market. With Brent benchmark currently trading below $80 per barrel, analysts now see OPEC+ producers, primarily Russia and Saudi Arabia, to extend their voluntary cuts into the next year.
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Analysts Think Recent Oil Sell-Off May Have Been Overdone
A significant surge in crude inventories and record-high production principally triggered the drop in oil’s value this week. Furthermore, indications of soft demand in China also added to the concerns.
However, the abrupt decline on Thursday raised questions among market watchers about whether the sell-off was exaggerated, especially when considering the tensions in the Middle East that pose a risk of supply disruptions and the US pledging to impose sanctions against Iran.
Additionally, the negative sentiment seen on Thursday was partly due to the faster-than-expected increase in jobless claims. According to new data, initial claims for state unemployment benefits grew by 13,000 to a seasonally adjusted 231,000 for the week ending November 11, beating the consensus estimates of 220,000.
Do you think oil prices will continue to rebound in light of the current macroeconomic backdrop? Let us know in the comments below.