Oil prices saw some stabilization and a slight increase on Friday but remained lower for the week due to concerns over weaker U.S. employment data and ongoing ceasefire talks in Gaza. Brent crude futures rose by 0.9% to $77.89 a barrel, while U.S. WTI crude futures increased by 1% to $73.70. Both benchmarks had fallen to their lowest levels since early January earlier in the week following the U.S. government’s revision of job numbers added by employers this year through March.
The job revision sparked fears of a potential recession in the U.S. impacting oil demand, but some analysts believe that the market overreacted. Federal Reserve Chair Jerome Powell’s upcoming speech will be closely watched by the market, with expectations of a rate cut next month. While a quarter point cut in September is already priced in, a larger half point cut might have a less favorable reception as it goes against the Fed’s intention to manage a controlled transition away from tightening.
Morgan Stanley highlighted that a drawdown in oil inventories has provided some support to oil prices. The bank mentioned that the oil market balance is currently tight, with inventories decreasing by approximately 1.2 million barrels per day in the last four weeks, which is expected to continue throughout the third quarter. Additionally, recent data from China, the leading oil importer, indicates a struggling economy and slowing oil demand from refiners. The renewed efforts for a ceasefire in Gaza between Israel and Hamas have also contributed to easing supply concerns and adding pressure on oil prices.
The market remains cautious due to the uncertainty surrounding the U.S. economy and global geopolitical tensions. The demand for oil has also been affected by the struggling Chinese economy, indicating a broader slowdown in global growth. As negotiations continue in Cairo to reach a truce between Israel and Hamas, the outcome could impact oil prices further depending on the geopolitical developments in the region. The market will be looking to key economic indicators and geopolitical events for further guidance on oil prices in the coming weeks.
Overall, while oil prices experienced some recovery on Friday, the week saw a downward trend due to various factors impacting the market. The focus remains on key events such as the upcoming Federal Reserve decision on interest rates, ongoing geopolitical tensions, and economic indicators from major oil-consuming countries. Investors are advised to monitor these developments closely to make informed decisions regarding oil investments. Despite the temporary stabilization in oil prices, the market is likely to remain volatile in the coming weeks, reflecting the uncertainty and risks associated with global economic conditions and geopolitical tensions.
