Oil prices poised for first weekly gain since November

Oil prices stabilised on Friday, positioning themselves for the first weekly increase since late November, as geopolitical tensions and economic indicators create a complex market landscape.

Brent crude futures marginally increased by 7 pence to $73.48 per barrel, while United States West Texas Intermediate crude rose 9 pence to $70.11 per barrel. Both contracts are anticipated to record a weekly gain exceeding 3%, influenced by potential supply disruptions and emerging economic signals.

Market strategists have noted the prices’ defence of a critical technical level at $71, though there remains limited conviction for a substantial price recovery. Yeap Jun Rong from IG highlighted the market’s cautious sentiment, suggesting ongoing uncertainty about future price movements.

Recent Chinese economic data revealed a significant development in crude imports, marking the first annual growth in seven months during November. This increase was attributed to lower prices and strategic stockpiling efforts by Chinese refineries.

Warren Patterson, head of commodities research at ING, expressed scepticism about the import volumes, noting that while refinery margins have marginally improved since September, the current levels do not fully justify the extensive crude imports.

The International Energy Agency (IEA) has revised its global oil demand growth forecast for 2025 upwards to 1.1 million barrels per day, an increase from the previous projection of 990,000 barrels. This adjustment is primarily attributed to recent Chinese economic stimulus measures.

However, the IEA simultaneously predicted a potential surplus in the upcoming year. Non-OPEC+ nations are expected to increase supply by approximately 1.5 million barrels per day, with key contributions from Argentina, Brazil, Canada, Guyana, and the United States.

Canadian oil producers have forecast higher output for 2025, while Goldman Sachs anticipates Lower 48 shale oil production to grow by 600,000 barrels per day. The investment bank noted that production growth could decelerate if Brent crude prices fall below $70 per barrel.

Crude imports by China, the world’s largest importer, are projected to remain elevated into early 2025. Refineries are strategically opting to increase supply from Saudi Arabia, attracted by competitive pricing, while independent refiners are expediting quota utilisation.

The global oil market remains sensitive to geopolitical developments, with additional sanctions on Iran and Russia contributing to supply uncertainty. These potential disruptions have provided some underlying support to oil prices.

Concurrent financial market expectations suggest potential interest rate reductions by the Federal Reserve, with investors anticipating initial cuts next week followed by further decreases. This speculation emerged after unexpected rises in weekly unemployment insurance claims, hinting at potential economic shifts.

Patterson from ING summarised the current market sentiment, suggesting that the outlook for a relatively balanced market provides little immediate impetus for significant price breakouts.