Oil prices extended their gains to more than 4%, at the end of trading today, Friday, May 5 (2023), but recorded weekly losses for the third time in a row.
This comes after the markets witnessed a significant decline amid fears of the economic impact of higher interest rates and slowing Chinese demand.
Oil drilling rigs in the United States decreased by 3 rigs during the past week, bringing the total to 588 rigs.
Crude oil prices today
At the end of the session, futures contracts for Brent crude, for delivery in July 2023, increased by 3.9%, to record $ 75.30 a barrel.
US West Texas Intermediate crude futures, for June 2023 delivery, also rose 4.1%, to record $71.34 a barrel, according to data seen by the specialized energy platform.
Crude oil prices ended their dealings, yesterday, Thursday, May 4, with a difference; US West Texas Intermediate fell, while Brent crude rose above $72, in an attempt to compensate for losses that amounted to more than 9% during the previous 3 sessions.
During the week ending today, benchmark Brent crude fell by 6.3%, and West Texas Intermediate crude fell by 7.1%.
Oil price analysis
“Instead of basic fundamentals, the selling frenzy over the past week has been driven by concerns about demand linked to recession risks and stress in the US banking sector,” said Stephen Brennock, oil market analyst at PVM.
He added, “The result is that there is a significant disconnect between oil balances and crude oil prices,” according to Reuters.
Commerzbank analysts said oil demand fears are exaggerated and they expect an upward correction in the coming weeks.
“It was a double whammy for crude oil prices,” said market analyst at IG Yip Jun Rong, noting that renewed US banking fallout has sparked contagion fears and amplified recession talks, while a sudden contraction in manufacturing activity in China dampened optimism. on oil demand forecasts.
OPEC+ cuts
“However, expectations of possible supply cuts at the next OPEC+ meeting in June provided some support for crude oil prices,” said Kelvin Wong, senior market analyst at OANDA.
“Yesterday’s sharp decline in WTI futures contracts was halted at a major support at $61.85,” Wong added, according to Reuters.
Traders focus on the release of US employment data for April later in the day, hoping it will help gauge the health of the economy, as well as comments on monetary policy from St. Louis Fed President James Bullard and Minneapolis Fed President Neel Kashkari at Economic Club of Minnesota.
Investors widely expect the Federal Reserve to pause rate hikes at its June meeting, after the US central bank removed language that it “expects” more rate hikes from its policy statement.
interest rates
Fears of a regional banking crisis in the US persisted after Backwest Bancorp said it plans to explore strategic options.
In China, factory activity contracted unexpectedly in April as orders fell and weak domestic demand dampened the sprawling manufacturing sector.
Data on Friday showed that service activity in China grew through April, although the rate of expansion slowed.
US data also showed that employers boosted hiring in April while raising workers’ wages, indicating continued labor market strength that may cause the Federal Reserve to keep interest rates higher for some time.
Investors widely expect the Federal Reserve to stop raising interest rates at its June policy meeting.
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