Oil prices have experienced a 2% gain on Friday as Iraq expressed support for OPEC+’s oil cuts ahead of a meeting scheduled on November 26. Despite this increase, prices still ended with a weekly 4% loss, marking their third consecutive weekly decline.
“This was the perfect technical storm. We came into this week with an almost record short position and now we’re seeing some short covering going into the weekend,” said Phil Flynn, an analyst at Price Futures Group.
Iraq’s announcement of its support for OPEC+’s oil cuts has contributed to the recent increase in oil prices. The country’s oil ministry stated that Baghdad is committed to the OPEC+ agreement on determining production levels.
Saudi Arabia and Russia confirmed this week that they would continue oil output cuts through the end of the year so as to stabilize oil prices.
Moreover, US energy firms have reduced the number of oil rigs operating for the second consecutive week. This decline brings the number of active oil rigs to the lowest level since January 2022. The rig count points to future output. Brent futures rose $1.42, or 1.8%, to settle at $81.43 a barrel, while U.S. West Texas Intermediate (WTI) crude rose $1.43, or 1.9%, to settle at $77.17.
Brent and WTI notched their third straight weekly losses for the first time since May, although both benchmarks exited technically oversold territory.
“Concerns about demand have replaced the fear of production outages related to the Middle East conflict,” analysts at Commerzbank said.
Weak Chinese economic data this week increased worries of faltering demand. Refiners in China, the largest buyer of crude from Saudi Arabia, the world’s largest exporter, asked for less supply for December.
US consumer sentiment has fallen for the fourth consecutive month in November, while households’ expectations for inflation have risen.
The US Federal Reserve Bank of San Francisco President, Marly Daly, has indicated that the Fed is not yet ready to determine whether it will continue raising interest rates. Higher interest rates can potentially reduce oil demand by slowing economic growth.
In Britain, the standing economy failed to grow in the July-to-September period but did avoid a recession, according to the UK’s Office for National Statistics.