More Daily, Weekly Gains For Oil As Traders Back IEA's Forecast Of Record Demand

But OPEC remains sceptical of a clear market horizon in 2023: File Image/Pixabay

After a week of trading that saw bearish and bullish sentiments vying for supremacy, oil on Friday managed to post a fourth consecutive week of gains, with daily prices up marginally due to the International Energy Agency forecasting record global demand.

Upon the IEA stating that world oil demand is set to grow by 2 million barrels per day (bpd) in 2023 to a record 101.9 million bpd, Brent settled up 22 cents at $86.31 per barrel - and posted a 1.5 percent weekly gain.

West Texas Intermediate settled up 36 cents at $82.52 per barrel, contributing to a weekly gain of 2.4 percent.

The IEA's optimism was based on predictions of ongoing stronger consumption in China after that country's lifting of Covid restrictions, and the agency pointed out that jet fuel demand accounts for 57 percent of the 2023 gains.

The IEA also stated in its monthly oil report that deep output cuts of 1.16 million bpd announced by the Organization of the Petroleum Exporting Countries (OPEC) and other producers would tighten oil supply, hurting consumers as well as global economic recovery.

For its part, OPEC argued that its most recently announced cuts were necessary as a "precautionary measure" to support market stability; it also claimed that global growth faces numerous challenges, including newly-reopened China not yet stopping a decline in global refining intake of crude.

OPEC's stance was questionable: recent data shows that China imported the most oil in three years last month, and on Friday Yi Gang, governor at the People's Bank of China, said the nation's economy is expected to grow about 5 percent this year.

Stoking positive sentiment further on Friday was the fact that WTI's prompt spread, which is the difference between its two nearest contracts, was at 9 cents per barrel in backwardation: a bullish pattern in stark contrast to it trading 16 cents in contango a month ago.

John Kilduff, founding partner at Again Capital, remarked, "The narrative has taken hold again of rising demand and relative supply tightness, and that's what's keeping oil buoyed."