Oil prices increased on Friday as supplies tightened and Russian production appeared to be declining. The market was anticipating the IEA’s monthly report, which would provide more insight into the forecast for global demand, later in the day. The price of Brent crude futures had increased by 34 cents, or 0.39%, to $86.43 per barrel. WTI crude futures increased by 40 cents, or 0.49%, to $82.56. In the prior session, both benchmarks had a more than 1% decline. With production reportedly reduced by 700,000 barrels per day (bpd), ANZ Bank analysts wrote in a client note that “Russian exports are showing signs of weakening.”
However, investors are also paying attention to the IEA’s monthly oil market report, which will be revealed later on Friday. According to an Organisation of the Petroleum Exporting Countries (OPEC) report released on Thursday, there are downside risks for summer demand due to a poorer economic environment, tighter monetary policy, and instability in the global financial system. The world’s second-largest oil user, however, increased its crude imports by 22.5% year over year in March, according to Chinese trade data released on Thursday, fueling optimism about the country’s economic rebound.
In a client note, JP Morgan analysts noted that “despite renewed economic pressures in the U.S. and Europe, global demand for mobility fuels has increased 2.2 million bpd during the reference week ending April 8 compared to year-ago levels.” While Brent is up 1.3% and WTI is up 2% so far this week, both are on pace to post increases for the fourth consecutive week. As a result of this week’s U.S. consumer and producer pricing data releases, which increased speculation that the Fed was nearing the end of its rate-hiking cycle, the U.S. dollar index was trading at a level that is nearly one year below its previous level.
Demand is increased because the dollar’s decline makes oil priced in dollars more affordable for investors holding other currencies. Analysts believe that current prices may be approaching a technical ceiling. According to a report from OANDA analyst Edward Moya, “it looks like the rally in crude prices has finally hit a wall.” According to CMC Markets analyst Leon Li, while oil prices are anticipated to rise, the increases are anticipated to be limited to $90 per barrel.
