Oil headed for a weekly increase on signs of tight physical supply but remained down this month amid persisting fears of economic slowdown.
West Texas Intermediate futures rose above $98 a barrel, bringing this week’s gain to about four per cent. Prices are more likely to rise than fall as tight supply outweighs any risks to demand, Shell plc chief executive officer Ben van Beurden said on Thursday after the company posted record profit in the second quarter.
Futures are still poised for the first back-to-back monthly decline since 2020 after fears over a slowdown fueled bearish sentiment across markets. The US economy shrank for a second quarter as rampant inflation undercut consumer spending. Citigroup Inc. says there are signs the oil market is moderating.
“The underlying fundamentals for oil still remain quite strong,” said Edward Bell, senior director of market economics at Emirates NBD Bank PJSC. “There are serious risks around supply: sanctions on Russia that will kick in more meaningfully later this year, OPEC+ topping out in terms of what it can add to the market, and the supply response in the US not coming on.”
While oil has given up most of the gains seen following Russia’s invasion of Ukraine in late February, the US benchmark is still up almost 30 per cent this year. The surge in energy prices has underpinned record second-quarter earnings for Shell and TotalEnergies SE, and other supermajors are likely to follow. A weaker dollar has also helped to boost commodity prices.
- WTI for September delivery rose 2.2 per cent to $98.55 a barrel on the New York Mercantile Exchange at 10:16 a.m. in London.
- Brent for September settlement, which expires Friday, added 2.1 per cent to $109.42 on the ICE Futures Europe exchange.
- The more-active October contract gained two per cent to $103.87.
The spread between WTI and Brent has widened as a reduction in Russian crude flows tightened markets in Europe. The global benchmark was at a premium of $10.38 to US crude, compared with $6.01 at the start of the month.
The US is optimistic that there could be some positive announcements from the OPEC+ meeting next week, a senior Biden administration official said. The meet will determine whether President Joe Biden will get the additional crude he requested for the global market during his visit to Saudi Arabia in mid-July.
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