Oil prices continued to rise on Friday, gaining over $1 per barrel as they attempted to reduce weekly losses amid escalating geopolitical tensions in the Middle East. Brent crude futures, now reflecting the January contract, increased by $1.41, or 2 percent, reaching $74.22 a barrel by 04:56 GMT. Meanwhile, U.S. West Texas Intermediate (WTI) crude futures climbed $1.46, or 2.1 percent, to $70.72 a barrel, following a 0.95 percent increase in the previous session.
Read more: Oil prices soar on optimism over U.S. demand, potential OPEC+ output delays
OPEC+ production plans under review
Support for oil prices also stemmed from expectations that OPEC+ may delay its planned production increase scheduled for December, according to four sources familiar with the situation who spoke to Reuters on Wednesday. They cited concerns over weak oil demand and rising supply, noting that a decision to postpone could be made as soon as next week, as indicated by two of the sources.
Weekly price trends and Middle East tensions
Despite these gains, prices are projected to decline by more than 1 percent for the week, struggling to recover from a significant 6 percent loss on Monday. This drop followed Israel’s military strike against Iran on October 26, which, while avoiding oil and nuclear facilities, did not disrupt energy supplies. Analysts suggest that WTI’s rebound could continue towards last Friday’s closing price of approximately $71.80, as Middle Eastern tensions remain a focal point.
Positive signs from China’s manufacturing sector
In China, manufacturing activity showed signs of growth in October, as indicated by a private-sector survey released on Friday. This aligns with an official survey published on Thursday, which marked the first expansion in manufacturing activity in six months, suggesting that recent stimulus measures are having a positive impact.
U.S. gasoline stockpiles decline
Additionally, the U.S. Energy Information Administration (EIA) reported on Wednesday that gasoline stockpiles unexpectedly dropped to a two-year low due to increased demand, while crude inventories also showed a surprising decrease as imports declined. The EIA noted that the U.S., the world’s largest oil producer, recorded a monthly production high of 13.4 million barrels per day in August.
Thursday’s market reactions
On Thursday, oil prices rose, building on the previous day’s gains, driven by optimistic sentiment surrounding U.S. fuel demand after an unexpected drop in both crude and gasoline inventories. Furthermore, reports indicating that OPEC+ might delay its planned output increase provided additional support. By 05:05 GMT, Brent crude futures were up by 47 cents, or 0.65 percent, reaching $73.02 a barrel. U.S. WTI crude futures, set to expire later in the day, climbed by 43 cents, or 0.63 percent, to $69.04 per barrel. Both contracts had surged over 2 percent on Wednesday, recovering from a significant decline earlier in the week as fears of a wider conflict in the Middle East diminished.
Unexpected inventory decrease
The unexpected decrease in U.S. inventories, according to the EIA, revealed that gasoline stockpiles fell to a two-year low during the week ending October 25 due to heightened demand. Crude inventories also saw an unanticipated reduction related to a decline in imports.
Investor sentiment and economic outlook
On Wednesday, oil prices rebounded after industry data highlighted an unexpected drop in U.S. inventories, with the ongoing conflict in the Middle East remaining a central concern. Investors are also looking ahead to a series of crucial economic reports and central bank meetings in major economies, which are expected to influence oil demand forecasts. By 00:11 ET (04:11 GMT), December Brent oil futures rose by 0.5 percent to $71.50 per barrel, while WTI crude futures increased by 0.6 percent to $67.63 per barrel. Earlier in the week, both contracts experienced a sharp drop following a less aggressive Israeli strike against Iran, which alleviated some concerns over a major escalation in the region.
API data and market implications
Data from the American Petroleum Institute (API) revealed a decline in U.S. oil inventories by 0.57 million barrels last week, contrary to expectations for a 2.3 million barrel increase. This trend typically suggests a similar outcome in the official inventory data set to be released later on Wednesday, providing some relief to oil markets by indicating that supplies remain somewhat constrained in the world’s largest fuel consumer.
Anticipated decline in U.S. oil demand
However, U.S. oil demand is anticipated to decrease in the upcoming months, as the winter season generally leads to reduced travel. Additionally, ongoing economic pressures from persistent inflation and high interest rates are expected to negatively affect demand.
Political uncertainty and market impacts
The approaching presidential elections introduce a significant layer of uncertainty in the markets, as the outcomes will shape U.S. policy for the next four years. Donald Trump and Kamala Harris are preparing for a competitive race, with both candidates advocating for increased U.S. oil production as part of their platforms.
For more news on markets, click here.
