Oil prices ended higher on Friday, but they marked their fourth consecutive quarterly loss, fueled by investor concerns over a global economic slowdown potentially denting fuel demand.
Benchmark Brent crude futures for August delivery, set to expire on Friday, closed 56 cents, or 0.8%, higher at $74.90. Over the quarter ending June, the contract saw a decrease of 6%.
U.S. West Texas Intermediate crude (WTI) ended up 78 cents, or 1.1%, at $70.64 a barrel, marking its second consecutive quarterly drop, with about a 6.5% decrease in the last three months. Increasing interest rates in major economies and a slower-than-expected recovery in Chinese manufacturing and consumption have exerted downward pressure on prices.
However, an uptick in U.S. economic activity and significant drops in U.S. oil inventories last week provided some support. Inflation in the U.S. also slowed its pace last month, according to a U.S. Commerce Department report, providing some stability to the crude market.
John Kilduff, a partner at Again Capital LLC in New York, noted that this moderating inflation “could prevent the Federal Reserve from hiking interest rates further.”
The market was additionally buoyed by increased forecasts in the demand for crude oil and refined products in the U.S. Demand for crude and petroleum products dipped slightly to 20.446 million bpd in April but remained seasonally robust, according to EIA data.
Saudi Arabia’s plans to further reduce output by 1 million barrels per day in July, along with a wider OPEC+ agreement to constrain supply until 2024, also contributed to supporting the prices.
HSBC analysts, however, noted that “Despite announcements of two new rounds of cuts from OPEC+/Saudi Arabia, crude prices have largely remained under $80 a barrel, as the market is less driven by fundamentals and more by macroeconomic worries.”
They projected this trend to continue for some part of the summer, with an expected deep deficit of around 2.3 million barrels in the second half of 2023 potentially sparking some upward price momentum.
A Reuters poll of 37 economists and analysts suggested that oil prices will face challenges in gaining momentum this year due to persistent global economic uncertainties. U.S. energy companies have been reducing the number of oil and gas rigs in operation for nine consecutive weeks, marking the first time since July 2020, according to energy services company Baker Hughes on Friday.
