Oil Rebounds As Trump Zeroes In On Russia, IEA Admits To Tight Market

However, long-term concerns about surplus remain intact: File Image: Pixabay

Oil prices rebounded on Friday, contributing to an almost 3 percent weekly gain for one key benchmark, as investors continued to assess reports of strong demand compared to concern over surplus.

As of 1722 GMT, Brent was up $1.68, or 2.5 percent, at $70.32 per barrel, and West Texas Intermediate rose $1.83, or 2.8 percent, at $68.40 per barrel.

For the week, Brent was headed towards a 2.9 percent weekly gain and WTI was up by 2 percent compared to last week’s close.

Friday’s buoyant market was spurred by the International Energy Agency, which said the global market may be tighter than initially thought, with refinery runs at peak to try and support record travel in the U.S. and power generation.

But this didn’t prevent the IEA from boosting its forecast for supply growth this year and trimming its outlook for demand growth, forecasting that world oil consumption will grow by just 700,000 barrels per day (bpd) in 2025, the slowest pace in 16 years excluding the 2020 pandemic slump.

In a similar vein, Commerzbank stated that, "OPEC+ will quickly and significantly turn up the oil tap. There is a threat of significant oversupply; in the short term, however, oil prices remain supported."

Commerzbank apparently didn’t take into account widespread rumours that the Organization of the Petroleum Exporting Countries, which recently agreed to boost output more than expected for August (by 548,000 bpd next month instead of the long-planned 411,000 bpd hike), may halt the output hikes.

More bullish signals on Friday included Saudi Arabia said to be ready to ship about 51 million barrels of crude oil next month to China, its biggest shipment in over two years; and Moscow announcing it will compensate for overproduction against its OPEC+ quota for August and September.

As for the new tariffs announced by U.S. president Donald Trump that sent oil trading into a tailspin during the previous session, concern shifted to optimism as the brash billionaire switched his focus to Russia and a sanctions bill that would levy 500 percent tariffs on China and India if they purchase Russian energy.

A Commerzbank report stated, “The U.S. could decide to impose new sanctions on Russia as early as the beginning of next week….lower oil supply from Russia is probably one reason why oil prices have so far been able to absorb the significant increase in OPEC+ production so well.”

Meanwhile, Israeli jets conducting strikes on Houthi targets further raised geopolitical tensions on Friday, following two Iran-backed Houthi attacks on merchant ships in the Red Sea earlier this week.

The attacks on shipping could boost freight rates and insurance costs for shippers, making crude supplies from the Middle East more expensive.