Oil prices drop on hazy demand outlook but are poised for a weekly gain
Oil prices in Asian trade fell on Friday with an uncertain demand outlook, but benchmark contracts turned to weekly gains as recession fears subsided.
Brent crude futures fell 49 cents, or 0.5%, to $99.11 per barrel at 0330 GMT, while West Texas Intermediate (WTI) crude futures fell 50 cents, or 0.5%, to $93.84 a barrel.
Brent is on track to climb more than 4% for the week, recouping part of last week's 14% tumble. 14% was the biggest weekly decline since April 2020 amid fears that rising inflation and interest rate hikes will hit economic growth and fuel demand.
WTI is heading for a weekly gain of more than 5%, recouping about half of the previous week's loss.
Uncertainty of the opposite demand view and expectations in demand from the Organization of Petroleum Exporting Countries (OPEC), and the International Energy Agency (IEA), limited price increases.
While the inflation peak narrative has provided some traction for risky assets recently, more restrained movements in oil prices since June suggest some reservations remain in light of the hazy demand outlook.
With the key psychological resistance for Brent at $100 a barrel, growth concerns may continue to limit the upward movement in oil prices.
There is great uncertainty about demand in the short term. It will be like this for a while (the market) until this situation improves.
OPEC on Thursday lowered its forecast for world oil demand growth in 2022 by 260,000 barrels per day (bpd). It now expects demand to increase by 3.1 million barrels per day this year.
This contradicts the view of the IEA, which raised its forecast for demand growth to 2.1 million barrels per day due to the switch from gas to oil in electricity generation as a result of rising gas prices.
At the same time, the IEA raised the outlook for the Russian oil supply for the second half of 2022 by 500,000 barrels per day but said OPEC will also struggle to increase production. However, it is evident that the Russian supply is more durable than thought.
Given the demand side versus the supply side, it's difficult to assess global oil balances until the end of the year right now. That's why the daily fluctuations will likely continue.
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