Oil Achieves Fourth Straight Week Of Gains As Tightening Supply Hits Home

One analyst sees the commodity trading as high as $95 next year: File Image/Pixabay

Even though oil trading this week has been described as rudderless and listless, the commodity on Friday achieved a fourth consecutive week of gains, propelled by a nearly 2 percent daily rise due to supply shortages and more tensions between Russia and Ukraine.

Brent settled up $1.43, or 1.8 percent, at $81.07 per barrel, with a weekly gain of about 1.2 percent; West Texas Intermediate settled up $1.42, or 1.9 percent, at $77.07 per barrel, with a weekly gain of nearly 2 percent.

Phil Flynn, senior market analyst at Price Futures Group Inc., said, "The oil market is starting to slowly price in a looming supply crunch," and he added that "Global supplies are starting to tighten and that could accelerate dramatically in the coming weeks."

Suhail al-Mazrouei, energy minister for the United Arab Emirates, told media on Friday that current output from the Organization of the Petroleum Exporting Countries (OPEC) is enough to support the market.

He said, "What we are doing is sufficient as we say today, but we are constantly meeting and if there is a requirement to do anything else then during those meetings, we will pick it up.

"We are always a phone call away from each other."

Russian crude exports are estimated to have sunk to a six month low in the four weeks to July 16, and Saudi Arabia's crude oil exports have also started to decline, to below 7 million barrels per day (bpd), for the first time in months.

As for geopolitical fears, they were stoked on Friday when Russia hit Ukrainian food export facilities for a fourth straight day and practised seizing ships in the Black Sea, following Moscow's withdrawal from a safe sea corridor agreement arranged by the United Nations.

However, trading sentiment continues to waver between appreciation for tighter supply and fear of lagging demand, and it was said that the chances for a further rate hike from the U.S. Federal Reserve later this month went up slightly after initial jobless claims data released in the previous session showed continued labour market resilience.

Looking further down the road, Jay Hatfield, CEO at Infrastructure Capital Management, estimated that the supply and demand balance for oil in 2024 would be in the $75-$95 range, "as limited OPEC+ supply and good demand in the U.S. is offset somewhat by weaker-than-expected demand in China as its economic recovery continues to lag."