Oil Logs 7th Weekly Decline As Friday Recovery Pummelled By Demand Concerns

Promising U.S. data was also offset by pessimism over China: File Image/Pixabay

A seventh weekly decline in oil prices was recorded on Friday – this time on the order of 3.8 percent - with crude gaining 2 percent for the day but not enough to overcome several sessions of negative trading driven by chronic concerns about demand destruction and oversupply.

Brent settled up $1.79, or 2.4 percent, at $75.84 per barrel, while West Texas Intermediate crude settled up $1.89, or 2.7 percent, at $71.23.

The daily gains were attributed to several factors, including U.S. Labour Department data released on Friday showing stronger-than-expected job growth; also, it was reported that U.S. consumer sentiment increased far more than expected in December.

Pundits such as Phil Flynn, senior market analyst at Price Futures Group Inc., believed Friday’s trading may signal that the market has found a floor: he said, "Look to step in with caution but the lows should be in."

Prices were also supported by Washington issuing a solicitation for 3 million barrels of oil for its strategic reserve, as well as announcing a plan to hold monthly tenders through at least May.

For the record, the 3 million barrels announced for March delivery amounts to just 1 percent of what has been depleted in that country; to date, about 9 million barrels of crude have been reinstated.

As always, bullish comments such as those supplied by Flynn were countered by warnings: Macquarie analysts including Marcus Garvey and Vikas Dwivedi said in a note, “The market is providing clear signals that should check the conviction of bull; these signals include skepticism about OPEC+ policy effectiveness, perhaps finally and strangely, a reluctance to bet against U.S. production growth after roughly a decade of outperformance by the U.S. shale industry, and maybe a shelving of the structural underinvestment thesis.”

The analysts were referring to the Organization of Petroleum Exporting Countries’ plans for deeper production cuts (announced earlier this week) being met by doubt over their efficacy.

Not to be outdone, a Bloomberg survey showed that Chinese consumption is expected to grow by 500,000 barrels per day (bpd) next year, less than a third of 2023’s increase.