Oil prices experienced a slight decline on Friday, marking the end of a week that saw notable gains, propelled by shifts in global dynamics and market sentiment. West Texas Intermediate crude futures dropped by 1.3% to $78.26 a barrel, while Brent oil futures also fell by 1.3% to $84.79 per barrel at 14:30 ET (18:30 GMT).
Despite the Friday downturn, both benchmark contracts recorded a positive week, with gains of approximately 2%. This upward trajectory was fueled by a mix of factors, including optimistic import data from China, the world’s largest oil importer. China’s robust oil imports, though slightly lower compared to the previous month, surpassed levels from the previous year, signaling resilience in demand.
Furthermore, a surprising decline in U.S. crude inventories and anticipated growth in refining and fuel demand buoyed market optimism. Data from the Energy Information Administration revealed a decrease of 1.36 million barrels in commercial crude oil inventories, driven by increased exports and heightened refinery activity.
The decline in the number of oil rigs operating in the U.S., dropping to 496, the lowest since November, also contributed to market dynamics. This reduction, coupled with a downward revision of U.S. oil production forecasts for the year, underscored potential shifts in supply-side dynamics.
However, geopolitical tensions in the Middle East, particularly the ongoing conflict between Israel and Hamas, injected a degree of uncertainty into the market. Israel’s continued assault on the South Gaza city of Rafah, despite ceasefire talks, underscored the persistent geopolitical risks inherent in the region. The decision by the U.S. to suspend weapon shipments to Israel further underscored international concerns regarding the escalation of violence.
Additionally, speculation surrounding the potential extension of output cuts by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, collectively known as OPEC+, also influenced market sentiment. The prospect of OPEC+ members rolling over output cuts into the second half of the year raised questions about future supply levels and market balance.
As the market navigates through these dynamic forces, stakeholders remain attentive to developments on both the supply and demand fronts, with geopolitical tensions and policy decisions shaping the trajectory of oil prices in the near term.
