Oil Posts Rare Weekly Gain As Fears Switch From Global Glut To Worldwide Tightness

Meanwhile, analysts disagree radically on demand outlook moving ahead: File Image/Pixabay

In less than a week, oil trading sentiment underwent a seismic shift from worries about oversupply to fears of supplies tightening due to additional sanctions on Russia, the result being crude prices on Friday settling at a three-week high.

Brent settled up $1.08 at $74.49 per barrel (its highest close since Nov. 22) and West Texas Intermediate crude settled $1.27 at $71.29 (its highest close since Nov 7); Brent was up 5 percent for the week, and WTI gained 6 percent for the week – the first weekly gains in three weeks.

The EU earlier agreed to a 15th package of sanctions intended to target Russia’s shadow fleet (which has helped it bypass the $60 per barrel price cap imposed by the G7) and Chinese firms making drones for Moscow; it also includes an extension of six months for the Czech Republic to import Russian oil-based products coming mainly through Slovakia.

Also supporting the analytical about-face was U.S. president-elect Donald Trump’s pick for national security adviser, who vowed to enact a return to “maximum pressure” on Iran – potentially leading to supply problems.

One thing that has driven bearish sentiment of late is the persistent idea that demand is on a long-term decline; yet on Friday this too saw a turnaround, with Rapidan Energy Group declaring that oil is set for a new boom period from the middle of the next decade, thanks to continued demand growth in China and elsewhere.

Bob McNally, founder of Rapidan, stated in a report, “As expectations of a 2030 peak in global demand recede, the reality of a structurally short supply side will come into view; spare capacity dwindles by 2035 and prices enter a boom cycle.”

The report went on to postulate that global gasoline consumption will keep growing through to 2035, even in the EV mecca of China, and that there’s “no end in sight” for consumption of the motor fuel.

But throwing a monkey wrench into this scenario was CNPC’s Economics & Technology Research Institute, which insisted that China’s refined oil consumption maxed out in 2023 at roughly 8 million barrels per day (bpd) and will decline by 1.3 percent in 2024.

The institute cited EV growth and a rise in alternative fuels for trucks as slashing demand for gasoline and diesel by as much as 50 percent from 2023 levels.

It fell upon Bloomberg to provide a loftier view of the topsy-turvy oil market on Friday, even though it was at a loss to explain the myriad conflicts in outlook; it stated, “prices have remained in a roughly $6 range since mid October, and the outlook for market balances in 2025 has grown murkier.

"The International Energy Agency on Thursday said global oil markets face a glut in 2025, while this week’s outlook from the Energy Information Administration sees markets broadly in balance next year.”