Oil heads for first monthly gain this year as a massive drop in US oil inventories and the global supply shrinks
Oil prices soared on Friday as Brent was poised for its first monthly gain this year, as the massive decline in US oil inventories outweighed concerns that further rate hikes would further dampen fuel demand.
Brent crude futures for September delivery rose 16 cents, or 0.2%, to $74.67 at 0405 GMT. The less-traded front-month contract expiring Friday was up 30 cents at $74.64.
West Texas Intermediate crude (WTI) rose 8 cents, or 0.1%, to $69.95.
After rising marginally on Thursday, both benchmarks are on track to climb more than 2.5% for June. While this is Brent's first monthly earnings for 2023, it will be the second for WTI after April's earnings.
Despite possibly monthly gains, on a quarterly basis, Brent is down about 6%, while WTI appears to be headed for a decline of around 7%.
Markets are worried about tightening supplies after the U.S. Energy Information Administration (EIA) said crude inventories fell 9.6 million barrels in the week ended June 23, well above the 1.8 million barrels analysts had forecast.
Meanwhile, in the first quarter, US gross domestic product (GDP) was revised to 2.0% from the previously reported 1.3%.
A significant upward revision in US GDP data has recently been added to the list of positive economic surprises in the US, and economic resilience is helping to calm recession concerns, at least for now.
Strong US economic data and the drop in oil stocks come at a time when Saudi Arabia plans to cut production by another 1 million barrels per day in July. A broader OPEC+ agreement is being worked on to limit supply in 2024.
Refinitiv data shows Russia's sea-going oil exports from Primorsk, Ust-Luga, and Novorossiisk down to 1.9 million bpd in July from 2.3m bpd in June as local refineries boost output, which could further tighten global crude supply.
However, Friday's oil price surge was capped by weak Chinese economic data and fears of interest rate hikes.
China's manufacturing activity contracted for the third consecutive month in June, albeit at a slower pace, according to an official factory survey on Friday. Non-manufacturing activities also fell in June.
The data largely matched analysts' forecasts. The fact that the contraction is relatively stable is a source of some comfort, at least things aren't getting noticeably worse.
In the US, Fed Chairman Jerome Powell signaled that the Fed will likely resume rate hikes after a hiatus earlier this month after stronger-than-expected new economic data came in on Thursday.
Data on the number of US oil rigs, an indicator of future supply, will be released later in the day.
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