Oil prices increase on OPEC+ expectations, but set for steep weekly losses
Oil prices crept higher on Friday on the prospect of supportive measures by the OPEC+, although fears of an economic slowdown stemming from a banking crisis kept gains limited and put prices on course for their worst week this year.
Media reports said that Saudi Arabian and Russian ministers met this week to discuss potential action by the Organization of Petroleum Exporting Countries and allies (OPEC+) to support crude markets, following sharp losses in recent sessions.
The news helped crude prices recover from 15-month lows, given that it likely points to more supply cuts by the cartel. But prices were still set for their worst week this year after the collapse of several U.S. banks brewed concerns over contagion in the economy, which in turn spurred fears of a looming recession this year.
Brent oil futures rose 0.3% to $74.86 a barrel, while West Texas Intermediate crude futures rose 0.2% to $68.47 a barrel by 22:01 ET (02:01 GMT). Both contracts were set to lose nearly 11% this week- their worst drop since early-December.
While U.S. and European government intervention in the banking sector helped quell fears of an immediate collapse, markets still remained on edge over any further ructions.
The OPEC+ had cut production by 2 million barrels a day in late-2022, and has provided scant cues on more cuts so far this year. While the cartel’s last cut had briefly supported markets, oil prices swiftly reversed their course and are trading negative for the year on fears of an economic slowdown.
Optimism over China provided some relief to crude markets, with both the OPEC and the International Energy Agency (IEA) recently reiterating their expectations that a recovery in the country will drive crude demand to record highs this year.
Goldman Sachs also hiked its outlook for Chinese economic growth in 2023, as the country reopens after three years of COVID lockdowns.
But this was largely offset by signs of oversupply in crude markets. The IEA said that oil inventories in developed OECD countries surged to an 18-month high in February, while output from Russia remained steady despite threats of more supply cuts by Moscow.
Additionally, U.S. crude inventories grew more than expected in the week to March 10, ramping up concerns over slowing demand in the world’s largest oil consumer. Crude inventories have now risen for 11 of the past 12 weeks, pointing to a potential supply glut in the country.