Oil climbs 2pc but still headed for seventh weekly drop

By News Desk
December 09, 2023

BENGALURU: Oil prices were on track for a seventh consecutive weekly decline for the first time in half a decade on Friday on concerns about surplus supply, but prices rose on the day after Saudi Arabia and Russia lobbied OPEC+ members to join output cuts.

Brent crude futures were up $1.71, or 2.3 percent, at $75.76 a barrel at 1704 GMT, while U.S. West Texas Intermediate crude futures were up $1.75, or 2.5 percent, at $70.67 a barrel. Offering some support, data showed U.S. consumer sentiment perked up much more than expected in December, a development likely to be welcomed by Federal Reserve officials.

This picture shows oil pumpjacks along a section of Highway 33 known as the Petroleum Highway north of McKittrick in Kern County, California. — AFP/File

Meanwhile, Saudi Arabia and Russia, the world's two biggest oil exporters, on Thursday called for all OPEC+ members to join an agreement on output cuts just days after a fractious meeting of the producers' club.

The Organization of the Petroleum Exporting Countries and its allies last week agreed to a combined 2.2 million barrels per day (bpd) in output cuts for the first quarter of next year.

The market has been concerned, however, that some members may not adhere to their commitments. Friday's price gains could be a sign that the market has found a floor for now after falling for six straight sessions, said Phil Flynn, analyst at Price Futures Group.

"Look to step in with caution but the lows should be in," he said. Brent and WTI crude futures slid to their lowest since late June on Thursday, a sign that many traders believe the market is oversupplied. Brent is on track to fall 3.9% this week and WTI 4.2%, the biggest weekly losses in five weeks.

Fuelling the market's downturn, Chinese customs data showed its crude oil imports in November fell 9 percent from a year earlier as high inventory levels, weak economic indicators and slowing orders from independent refiners weakened demand.

U.S. Labor Department data released on Friday showed stronger-than-expected job growth and a drop in the unemployment rate, signalling resilience in the labor market and dampening hopes that the Fed will cut interest rates by early next year.

U.S. output remained near record highs of over 13 million barrels per day, U.S. Energy Information Administration data showed. U.S. gasoline stocks rose by 5.4 million barrels last week to 223.6 million barrels, the EIA said, more than quintuple the 1 million barrel build that had been expected.

Concerns about China's economy also put a lid on oil's price gains. Chinese customs data showed that crude oil imports in November fell 9 percen from a year earlier as high inventory levels, weak economic indicators and slowing orders from independent refiners weakened demand.

While China's total imports dropped on a monthly basis, exports grew in November for the first time in six months, suggesting an uptick in global trade flows may be helping the manufacturing sector.