Oil Prices Drop 0.6% for Brent, 0.7% for WTI

Oil Prices Drop 0.6% for Brent, 0.7% for WTI

Key Points:

  • Oil Prices Decline: On Friday, Brent crude futures fell 0.6% to $82.22/barrel, and WTI futures dropped 0.7% to $77.72/barrel.
  • Weekly Gains: Despite the dip, oil prices rebounded with over 3% weekly gains for Brent and WTI, driven by tighter supply hopes.

On Friday, oil prices experienced a slight decline as traders opted to lock in profits after a generally positive week. The market witnessed a downtrend, with Brent crude futures dipping by 0.6% to settle at $82.22 per barrel for August expiry. Similarly, WTI crude futures saw a 0.7% decrease, ending at $77.72 per barrel. Despite this end-of-week dip, the overall performance for the week remained robust.

Crude Oil Prices Up 3% Weekly for First Time in 4 Weeks

Crude prices were poised for their first weekly gain in four weeks, bolstered by hopes of tighter supplies. Contracts for both  WTI And Brent increased by more than 3% over the week. This rebound came after sustained lows, marking a positive shift in market sentiment. The key driver behind this upward trend was OPEC and its allies (OPEC+), reiterating their commitment to maintaining lower production levels to sustain prices.

Potential OPEC+ Cut Adjustment of 2.2M BPD

OPEC+’s actions have significantly influenced the recent movements in oil prices. During the June meeting, OPEC+ suggested reducing its 2.2 million barrels per day production cuts later in the year. The market poorly received this announcement, as it implied a potential rise in supply. However, OPEC+ emphasised that any increase depends on stable or increasing oil prices.

OPEC+ Keeps Demand Growth Projection Steady

In its monthly report, OPEC+ upheld its yearly forecast for oil demand growth, attributing this to better prospects from a potential reduction in global interest rates. This optimistic outlook helped stabilise market expectations and supported the rebound in prices. The reiteration of the forecast underscored OPEC+’s confidence in the market’s ability to balance itself despite external economic pressures.

Fed’s Rate Plans for 2024 Affect Oil Price Outlook

The oil market dynamics became even more complex due to the conflicting signals on US interest rates. The Federal Reserve indicated that there would be fewer interest rate cuts in 2024 than initially forecast. While soft inflation readings had pushed up hopes for a prolonged low-interest-rate environment, the Federal Reserve’s statement tempered those expectations.

IEA Projects Supply Glut, Lowers Demand Forecast

Various market indicators present a complicated outlook for the oil market. Despite the anticipated rise in demand during the travel-heavy summer season, US inventories unexpectedly increased last week. Additionally, the International Energy Agency (IEA) reduced its annual demand growth forecast, attributing this to an expected increase in supply from non-OPEC countries, particularly the US.