Oil Achieves Weekly Gain But Daily Loss As Analysts Disagree On Upcoming Market Momentum

Meanwhile, China continues to be viewed as a lodestone for demand growth: File Image/Pixabay

OiI prices achieved a record weekly gain on Friday despite a daily drop due to profit taking, but analysts noted that the commodity may be overbought and that the familiar concerns obsessing analysts – bank rate hikes and the potential for weaker demand – were not far from the surface.

Brent settled down $1.49, or 1.8 percent, at $79.87 per barrel, while West Texas Intermediate fell $1.47, or 1.9 percent, to settle at $75.42 per barrel; in total, oil gained nearly 2 percent on the week, attributed to the Thursday closure of several oilfields in Libya and Nigeria due to protests and a potential terminal leak, respectively.

Scott Shelton, an energy specialist at ICAP, noted that weak refining margins in some parts of the U.S. weighed on sentiment, making it more challenging for prices to overcome technical resistance despite a recent improvement in macro signals.

Moving forward, Rob Haworth, senior investment strategist at U.S. Bank Wealth Management, said, "While oil prices are likely slightly overbought in the very near term, touching the highest levels since early May, the bias appears to be for a grind higher."

Haworth said a return to the rally could resume with easing inflation, supply cuts and other matters supporting the market.

But John Kilduff, founding partner at Again Capital, observed that "some demand concerns [are] coming back to the front and center as the dollar rebounds," a reference to the strengthening U.S.'s dollar's contribution to Friday's trading motivations.

Some of these concerns caused Craig Erlam, senior market analyst at OANDA, to question whether a rally would continue: "Chinese imports and exports slumped at a faster pace than expected in June in another sign of weakening global trade; we've seen this trend all year and clearly, conditions are not improving, quite the opposite.

"This will maintain pressure on the economy with domestic demand also disappointing, as seen by the weaker import number; targeted stimulus may be needed sooner rather than later or the country's once seemingly modest5 percent growth target may be at risk of being missed."

The one thing uniting the crude analytical community – the diversity of conflicting opinions – continued to be evident on Friday with Giovanni Staunovo, strategist at UBS, stating  in a note, "With less supply from OPEC+ during the demand-heavy summer months, we expect larger oil inventory declines to become visible and support oil prices."

This view was apparently not shared by the International Energy Agency, which cut its global oil demand growth forecast for the first time this year due to what it perceived to be a worsening economic outlook (for the record, it now believes oil demand will climb by 2.2 million barrels per day (bpd) in 2023 to reach an average of 102.1 million bpd).