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Oil prices rebound but set for 7th weekly loss

(Montel) Oil prices bounced back in early trading on Friday after hitting five-month lows in the previous session but remained on track for a seventh consecutive weekly loss amid bearish market sentiment.

The front-month contract for Brent crude North Sea oil was last seen up USD 1.51 at USD 75.56/bbl, while the WTI equivalent was USD 1.36 higher at USD 70.70/bbl.

Both benchmarks hit their lowest levels since late June on Thursday, with Brent crude tumbling to USD 73.60/bbl.

“The weakness in the oil market persists,” said analysts at ING bank in a Thursday note, pointing to weaker demand data from China, the world’s largest oil importer, as a key short-term bearish factor.

China trade data could “cap oil’s rebound”, said Tina Teng of CMC Markets in a note.

“Chinese trade balance data showed that the country’s domestic demands saw further weakness, with its November imports only rising 0.6% year on year,” she said.

“Oversold” market
The price rise was the result of “technical buying, after the recent sell-off pushed it into oversold territory”, said analysts at Australia’s ANZ bank in a note, as oil prices had hit other multi-week lows earlier this week.

A softer dollar against other currencies has increased investors’ appetite in the dollar-dominated oil market.

Last week’s announcement of voluntary production cuts totalling 2.2m bbl/day by Opec+ has the potential to improve the market balance, analysts noted, but this is yet to materialise.

Of the total, Saudi Arabia, the biggest Opec producer, will cut 1m bbl/day in crude output through the end of the first quarter, while Russia will reduce output by 0.5m bbl/day, in which 0.2m bbl/day would be refined products, from January through March, the cartel said. The rest of the curbs will come from the United Arab Emirates, Kuwait, Kazakhstan, Algeria and Oman.

“Opec’s announcement of deeper production cuts should support physical balances, but the market will have to be convinced before any of these cuts are priced in,” said ANZ analysts.

“Nevertheless, the cuts should see our previously forecast surplus in Q1 2024 turn into a small deficit,” they added.

A recent decrease in US commercial oil stocks could also help improve market balance, with the country’s Energy Information Administration reporting stocks decreasing by 4.6m bbl week on week late on Wednesday.