Oil Mixed On Confusing Signals Of Oil's Current Health And Future Demand

OPEC is emerging as the prime booster of oil's ongoing global relevance: File Image/Pixabay

The dichotomy between chronic bearish sentiment regarding oil demand and reasoned forecasts for robust  fuel consumption was evident on Friday as crude dipped again but nonetheless posted a 4 percent weekly gain.

The daily losses were said to be the result of investors responding to a survey showing that U.S. consumer sentiment weakened in June to a seven-month low.

Bob Yawger, director of energy futures at Mizuho, said, "The data came in way lower than expected; that implies the average consumers don't have confidence the economic situation is improving."

Brent settled down 13 cents at $82.62 per barrel, while West Texas Intermediate settled down 17 cents at $78.54.

However, the 4 percent weekly rise was attributed to the Organization of the Petroleum Exporting Countries (OPEC) earlier forecasting relatively strong oil demand growth of 2.2 million barrels per day (bpd), accompanied by the U.S. Energy Information Administration upgrading its demand growth estimate for 2024.

In fact, Haitham Al Ghais, secretary general at OPEC, called for continued investment in fossil fuels to prevent a shortfall.

Still, the analytical community seems awash in conflicting sentiment, due to mixed signals delivered by experts, to wit: the International Energy Agency in its latest report stated that the world's total oil supply capacity is expected to rise to about 114 million barrels per day (bpd) by 2030, 8 million bpd above projected demand; the agency also cut its demand growth forecast to under 1 million bpd.

For its part, Bloomberg pointed out that, "Crude prices have retreated about 10 percent from a peak reached in mid-April on concerns over China's economic outlook and indications of rising supplies from the U.S. and other parts of the Americas."

Matt Smith, lead oil analyst at Kpler, told media the risk is to the upside for oil prices, albeit with limited gains: "You kind of got the bullish argument that we're going into summer, refinery runs are going to be super strong drawing down inventories.

"We could get up to $90, but we'll come back down again; we're not going to $95, by no means are we going to $100 per barrel here."