Oil Achieves Fifth Straight Months Of Gains As Supply Fears Trump Demand Concerns

Meanwhile, Chevron becomes the latest energy company to boost output: File Image/Pixabay

Despite oil trading's extreme volatility of late and mixed results for the session overall, the commodity on Friday achieved a fifth straight month of gains – the longest streak since early 2018 – with demand concerns viewed as fleeting but supply worries persistent.

West Texas Intermediate settled down 67 cents at $104.69 per barrel, while Brent for June settlement, which expired Friday, settled up $1.75 to $109.34 (the more active July contract settled down 12 cents to $107.14).

The late-session sell-offs were attributed to low volumes in the front-month contracts of U.S. heating oil (a proxy for diesel prices), Brent, and U.S. gasoline futures, according to analysts such as Andrew Lipow, president of Lipow Oil Associates: "The fireworks were all in the expiring diesel contract; today's expiry is especially volatile and may not be reflective of actual tightness."

Oil prices for the past few weeks have been influenced by China's Covid lockdowns and the European Union coming closer to enacting an embargo on oil from Russia for its invasion of Ukraine.

Rebecca Babin, senior energy trader at CIBC Private Wealth Management, said, "Next week will be critical as we will get official selling prices from Saudi as a good litmus test for how much demand is suffering in China."

But tight global supplies remain the dominant concern for many analysts, especially as there seems to be no end in sight of the Russian/Ukraine war; and on Friday Chevron Corp, despite equipment shortages, announced that it had lifted its production target in the Permian Basin in Texas by 15 percent this year (to the equivalent of about 725,000 barrels per day).

The expansion follows similar moves by Continental Resources, Hess Corp., and Matador Resources amid sky-high crude and gasoline prices, and Chevron CFO Pierre Breber told media his company is now "back on the trajectory that we were on pre-Covid" in the biggest U.S. shale basin.

Overseas, U.K. prime minister Boris Johnson will meet with key oil and gas producers in a bid to spur new field developments in the North Sea, whose new projects up until recently were dwindling in the face of pressure to tackle climate change.

The roundtable discussion was originally scheduled for May 4 but will now take place in the coming weeks, according to insiders.

In other oil-related news on Friday, Exxon Mobil's first quarter profits were revealed to be $5.5 billion, up from $2.7 billion in the same period last year and despite the company taking a $3.4 billion after-tax charge related to its Sakhalin-1 operation in Russia.

CEO Darren Woods said in a statement, "Earnings increased modestly, as strong margin improvement and underlying growth was offset by weather and timing impacts."