Despite widespread bearish sentiment permeating the oil-trading sector, investors were responsible for the commodity achieving daily and weekly gains on Friday, propelled partly by a massive crude stock drawdown in the U.S.
Brent settled up 6 cents to $67.73 and gained 2.9 percent for the week; West Texas Intermediate settled up 14 cents to $63.66 and gained 1.4 percent for the week.
U.S. stockpiles fell by a massive 6 million barrels in the week ended August 15, according to the Energy Information Administration, compared to expectations of a 1.8 million barrel draw – a strong indicator of robust demand.
Oil was said to have also been boosted on Friday by U.S. Federal Reserve chair Jerome Powell signalling a willingness to cut interest rates in September.
However, offsetting this was news from Germany showing that Europe’s largest economy shrank by 0.3 percent in the second quarter, thus compromising the demand scenario at least in theory.
As for the stalled peace talks between Russia and Ukraine, U.S. president Donald Trump is seeking to arrange a summit between the two countries’ presidents; but the less likely success appears, the more likely the risk of tougher U.S. sanctions on Russia, ING analysts said on Friday.
Giovanni Staunovo, an analyst at UBS, added, “Everyone is waiting for President Trump’s next step…over the coming days, it seems nothing will happen.”
Meanwhile, White House trade adviser Peter Navarro condemned India for continuing to buy Russian oil and said he expected Trump to follow through on his threat to raise the import duties on Indian goods to 50 percent as punishment
For their part, Morgan Stanley analysts including Martijn Rats and Charlotte Firkins offered their opinion of the state of the oil market by writing in a note that it “is heading for a surplus in coming quarters that is both unusually large but also unusually well-anticipated by now.
“The former suggests prices will likely weaken; the latter suggests this is unlikely to turn into a disorderly sell-off.”
UBS’s Staunovo was of a similar opinion: he said, “With supply in South America still expected to increase a bit more, we see the oil market better supplied over the months ahead.”
He added, “We expect global oil demand to peak for the year in August and modestly decline over the coming months,” with prices expected to drop toward the lower end of the $60-$70 per barrel range.
