Oil prices dipped 1% on Friday because of broader economic worries and traders taking profits. However, they surged approximately 30% over the quarter, influenced by OPEC+ production restrictions tightening the worldwide crude supply.
Brent futures for November saw a drop of 7 cents, ending at $95.31 per barrel as the contract expired. This marked a weekly rise of about 2.2% and a quarterly increase of 27%. The more actively traded Brent contract for December declined by 90 cents, closing at $92.20 per barrel.
U.S. West Texas Intermediate crude (WTI) decreased by 92 cents, ending at $90.97. This represents a weekly rise of 1% and a quarterly increase of 29%.
As oil futures approach the $100 per barrel mark, numerous investors decided to cash in on the rally, keeping in mind the prevailing macroeconomic uncertainties.
“WTI has been the star attraction, but today its shine is dimming,” remarked John Kilduff, a partner at Again Capital LLC in New York, attributing this to both profit-taking and economic apprehensions.
Oil and gas operations in three major U.S. energy states have escalated in response to the recent surge in prices, as reported by a survey from the Federal Reserve Bank of Dallas.
In July, data from the Energy Information Administration indicated that U.S. crude production reached its peak in November 2019.
Investors are now anticipating a potential partial shutdown of the U.S. government on Sunday. Lael Brainard, the chief White House economic adviser, labelled this as an “unneeded hazard” to the robust U.S. economy.
Concerns about the Chinese economy deepened after shares of the debt-laden property developer, Evergrande Group (3333.HK), were halted indefinitely due to reports of its chairman being under police surveillance.
Baker Hughes (BKR.O) reported that the U.S. oil and gas rig count, a precursor to future production, dropped by seven to 623 in the week ending Sept. 29, marking the lowest point since February 2022. Their report, released on Friday, is highly regarded in the industry.
In the third quarter, the total rig count declined by 51. However, this rate of decrease has decelerated when compared to the 81 rig drop in the previous quarter, likely a result of rising oil prices stemming from constricted supplies.
Based on a survey conducted by Reuters, 42 economists predict Brent to average $89.85 per barrel in the upcoming quarter and $86.45 in 2024.
The OPEC+ ministerial conference is scheduled for Oct. 4, and analysts from the National Australia Bank highlighted in a note to their clients an increasing likelihood that the voluntary supply reductions by Aramco, Saudi Arabia’s national oil company, might be scaled back.
Supply reductions, particularly those announced by giants like Saudi Arabia and Russia, are anticipated to heavily influence oil prices for the rest of 2023.
Nonetheless, Suvro Sarkar, the head of the energy sector team at DBS Bank, cautioned that any surge towards $100 per barrel might be temporary, attributing this to the artificially induced supply gaps and the delicate macroeconomic landscape.
