By Peter Bergman (MoneyAmped.com)
On Friday, oil prices experienced a surge of over 2% due to data from the United States that reinforced predictions of an increase in demand. However, both benchmarks faced a decline for the seventh consecutive week, marking their lengthiest period of weekly decreases in five years, primarily due to ongoing worries about an excess supply.
The settlement price for Brent crude futures was $75.84 per barrel, marking an increase of $1.79 or 2.4%. Similarly, U.S. West Texas Intermediate crude futures settled at $71.23, experiencing a rise of $1.89 or 2.7%.
Excess Supply Pushes Prices Down
During the week, both benchmarks experienced a decline of 3.8%, following a drop to their lowest levels since late June on Thursday. This indicates that numerous traders perceive an excess supply in the market.
Additionally contributing to the decline in the market, Chinese customs data revealed that crude oil imports in November experienced a 9% decrease compared to the previous year. This import reduction can be attributed to ample inventory levels, lackluster economic indicators, and declining orders from independent refiners, resulting in a weakened demand for crude oil.
Nevertheless, the gains observed on Friday, which mark the first positive movement in six consecutive sessions, might indicate that the market has reached a stable level after experiencing a decline for six straight sessions, as stated by Phil Flynn, an analyst at Price Futures Group.
“Take heed and approach with care, yet anticipate the arrival of the troughs,” he uttered.
Data released by the U.S. Labor Department revealed job growth that exceeded expectations, indicating a robust labor market that will likely boost fuel demand in the most significant oil market.
Gasoline Inventories Rose More Than Expected
The government’s above data revealed that the demand for gasoline in the United States last week was 2.5% lower than the average for the past ten years. Additionally, there was a significant increase in gasoline stocks, with a rise of 5.4 million barrels, surpassing expectations by more than five times. As a result, the prices of gasoline experienced a sharp decline.
Similar to rough, U.S. RBOB gasoline futures experienced a recovery of approximately 3% on Friday following a drop to their lowest point in two years on Thursday.
According to Rob Haworth, the senior investment strategy director at U.S. Bank Asset Management, the Energy Information Administration (EIA) report released on Wednesday, which raised worries about decreased demand due to a notable rise in gasoline supplies, might not be as problematic considering the positive impact of the robust jobs report.
Providing increased backing to the request excitement, data indicated that consumer sentiment in the United States experienced a notable uplift in December, surpassing initial expectations.
Saudi Arabia and Russia Join Forces
In the meantime, Saudi Arabia and Russia, the two largest oil exporters globally, issued a plea on Thursday for all OPEC+ participants to unite in an accord regarding reductions in production. This request comes shortly after a contentious gathering of the producers’ club.
Last week, the group known as the Organization of the Petroleum Exporting Countries (OPEC) and its partners agreed to decrease their daily oil production by 2.2 million barrels for the initial three months of the upcoming year. However, there has been a prevailing unease in the market regarding the possibility that certain participants might need to uphold their obligations.
