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Oil prices hover near 2-month high, set for 4% weekly rise

(Montel) Oil prices corrected down in early Friday trading but hovered close to two-month highs reached in the previous session and looked set for up to a 4% weekly gain amid stronger economic sentiment.

The front-month contract for Brent crude North Sea oil was last seen down USD 0.39 at USD 82.04/bbl, while the WTI equivalent was USD 0.59 lower at USD 76.77/bbl.

On Thursday, both contracts hit their highest prices since 30 November, with the Brent benchmark rising to USD 82.57/bbl – the first time it has surpassed USD 82/bbl since that date.

Both were on track for their second straight week of gains and the biggest weekly increase since the week ending 13 October after the start of the Israel-Hamas conflict in Gaza.

US data released yesterday showed the economy in the world’s biggest oil producer and consumer grew faster than expected in the final months of 2023, driven by robust household and government spending, which boosted demand sentiment.

The economy expanded at an annual rate of 3.3% in Q4, much faster than the 2% analysts had expected, the BBC reported.

This came after official data showed on Wednesday that US commercial crude oil inventories fell last week to 420.7m barrels – around 5% below the five-year average for the time of year.

“The markets have been basing for a while and now I think we have a real shot at oil taking off to the upside,” said Christoper Lewis of FX Empire in a note. “We have an oversupply of oil at the moment as far as production is concerned.”

Tensions continue
Meanwhile, tensions in the Middle East continue with reports of Qatari-mediated talks to broker a deal for the release of the remaining hostages held in Gaza becoming deadlocked over Israel’s reported refusal to agree to a permanent ceasefire.

Yesterday, Abdel-Malik al-Houthi, the leader of the Yemen-backed Houthi group said it would continue the attacks on ships transiting the Red Sea, which started in November, until aid reached Palestinian people in Gaza.

The group claims it is targeting tankers linked to Israel due to its military operation in Gaza. He added that retaliatory attacks by US and UK forces would not affect “our will and determination”.

However, the risk priced in by the market has been fairly moderate compared with the levels reached following Russia’s invasion in Ukraine, said Erik Meyersson, chief strategist at SEB, in a note.