Five Weeks of Rising Oil Prices: Is a Supply Crunch on the Horizon

NEW YORK, July 28 - An optimistic streak ran through the oil market on Friday as oil prices climbed, marking the fifth consecutive week of gains. Investors believe robust demand and trimmed supply will help maintain a healthy market environment.

Enthusiasm in broader financial circles has been kindled by a growing sense that key institutions, like the U.S. Federal Reserve and European Central Bank, are nearing the closure of policy tightening drives. This change may bolster the global growth perspective and enhance energy demand.

The OPEC+ alliance's recent supply reductions have reinforced both oil standards, contributing to an approximately 5% increase over the week - the fifth successive weekly rise. Both standards are poised to attain an over 13% increment for the month.

Brent crude finished 75 cents up, settling at $84.99 per barrel, while the U.S. West Texas Intermediate (WTI) crude surged 49 cents, ending at $80.58 per barrel.

Investors briefly pulled back after WTI broke the $80 per barrel barrier, leading to a momentary drop of about $1 in both standards, according to Phil Flynn, analyst at Price Futures Group.

Sentiments of strong demand got a shot in the arm on Thursday following a higher than projected 2.4% growth in U.S. second-quarter GDP, endorsing Federal Reserve Chairman Jerome Powell's optimism about a possible "soft landing" for the economy.

Investor sentiment is coalescing around the likelihood of peak rates drawing near, while the chances of the U.S. dodging a recession seem to be on the rise, remarked Tamas Varga, PVM analyst.

Surprisingly sturdy performances from some of Europe's top economies in Q2 were revealed in Friday's fresh data, despite signs of impending weakness as manufacturing struggles and services decelerate.

Concurrently, Chinese authorities have committed to bolstering stimulus tactics to energize the post-COVID comeback, following a slow Q2 growth rate in the world's second-largest economy.

Exxon Mobil's chief, Darren Woods, declared in a Friday interview his expectation of record-breaking oil demand for this year and the next.

In terms of supply, the number of U.S. oil rigs dipped to 529 this week, the lowest since March 2022, according to energy services company Baker Hughes. This data hints at prospective supply patterns.

Tightening indications, such as dwindling U.S. stockpiles and Saudi Arabia's voluntary curtailment of 1 million barrels per day, are becoming more pronounced, noted Commerzbank analysts, suggesting that OPEC's oil production this month could have slumped to its nadir since autumn 2021.

Analysts anticipate Saudi Arabia extending their voluntary oil production reduction into September, lending extra buttress to the oil market.
Report by Stephanie Kelly in New York, with Natalie Grover in London, Laura Sanicola in Washington, and Andrew Hayley in Beijing contributing; Edited by Deepa Babington and Kirsten Donovan.

Source ; Reuter (Reporting by Stephanie Kelly)