Oil prices set for weekly gain on US growth, ME concerns
Saturday, 27 January 2024
LONDON (Reuters): Oil prices eased on Friday but remained on course for a second consecutive weekly gain, supported by positive US economic growth and Middle East supply concerns.
The United States, the world's biggest oil consumer, registered faster than expected economic growth in the fourth quarter, data showed on Thursday. Oil demand sentiment was also buoyed this week by China's latest measures to boost growth.
Brent crude futures were down 58 cents, or 0.7 per cent, at $81.85 a barrel by 1227 GMT, having set its highest price so far this year with an intra-day peak of $82.57 in the previous session. US West Texas Intermediate crude was down 74 cents, or 1 per cent, at $76.62.
"The economy remarkably weathered the storm caused by past rate rises and it remains ebullient at the beginning of 2024," Tamas Varga, of oil broker PVM, said of the United States, adding that China's cut to the amount of cash reserves banks must hold was "another welcome development".
Brent crude and the US benchmark were set for weekly gains of 4.2 per cent and 4.4 per cent respectively. Both were on track for their biggest weekly increase since the week ending Oct. 13 after the start of the Israel-Hamas conflict in Gaza.
Prices slipped on Friday on hopes that oil shipping disruptions in the Red Sea could ease after Chinese officials asked Iran to help rein in attacks on ships by the Iran-backed Houthis or risk harming business relations with Beijing.
Still, previous interventions by U.S. and UK forces in the Red Sea did not prevent attacks, leading investors to price in continued disruption, said Yeap Jun Rong, a market strategist at IG in Singapore.
Supply concerns are evident in the structure of Brent futures, meanwhile. The premium of the first-month contract to the sixth rose to $2.58, its highest since November, indicating a perception of tighter prompt supply.
Oil was also boosted this week by a larger than expected drawdown in US crude stockpiles and potential fuel supply disruption after a Ukrainian drone attack on an export-oriented oil refinery in southern Russia.