Oil suffers second weekly loss as analysts differ on inflation and demand

Despite an extraordinarily tight crude oil market, fears of inflation-driven demand destruction led oil to suffer its first straight weekly loss since April on Friday, with West Texas Intermediate falling 1.7 percent.

However, the losses were reportedly mitigated somewhat by the University of Michigan’s final June reading of consumer longer-term inflation expectations, which fell from an initial 14-year high, potentially reducing the possibility of steeper rate hikes.

WTI settled on Friday $3.35or 3.2 percentat $107.62while Brent settled down $3.07or 2.8 percentat $113.12 per barrel.

Also, the market remains in backwardation, with Brent’s prompt spread being the difference between his next two contracts $4.02 per barrel compared to $2.73 a week ago; this reflects a still strong demand for real casks.

Even more impressive is middle East Murban Crude, which was reportedly in backwardation of more than $10 over the next two months, indicating a major supply shortage.

While many insiders are frustrated by this Organization of Petroleum Exporting Countries OPEC‘ (OPEC) refusal to change dynamics by pumping everything out, Nigeria‘s oil minister said on Friday the cartel had run out of capacity to pump more crude oil.

Timipre Sylva in a briefing with reporters, said: “Some people think the prices are a bit too high and expect us to pump a bit more, but right now there’s really little extra capacity; even Saudi Arabia, Russiaof course Russia, [are] now more or less out of the market.”

Sylva added, “Right now I think prices are firming and I don’t think there will be any surprises from OPEC in August.”

found Friday Ed MoyaSenior Market Analyst Oanda, in a somewhat optimistic mood on the short-term outlook for Crude Oil; He noted, “Wall Street remains optimistic that inflation will improve next year, and that’s good news for risky assets, especially commodities.”

but Amrita SenCo-Founder and Head of Research at Energy Aspects Ltd, noting on Friday that the recent slump in oil prices will not provide immediate relief from inflation, adding: “The caution is about refining capacity; We’ve seen crude oil prices fall, but the products really haven’t.”

As for demand destruction, Michael TranAnalyst at RBC capital marketssaid “there is minimal evidence” and that “the potential for [U.S.] president Joe BidenThe gasoline tax exemption effectively sustains demand, with the unintended consequence of further destocking and keeping prices high for longer.”

Stephen BrennockAnalyst at PVMPut a different spin on crude oil prospects, saying recession fears are currently trumping sentiment, but “the consensus is that the oil market will see high demand and tight supply over the summer months, limiting downside.”

About Christine Geisler

Check Also

Oil bounces back as supply eases but market is not too bullish, analyst says

OPEC’s tiny production increase is now considered cautious: File Image/Pixabay Inflation rose at a slower-than-expected …