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Fundamental Forces Clash In Turbulent Oil Market

U.S. West Texas Intermediate crude oil futures are trading slightly higher on Friday but are still in a position to post its first weekly loss in three weeks as mixed fundamentals continue to control the price action.

Bullish traders are pinning their hopes for higher prices on dwindling fuel supplies for Russia, while bearish traders are betting aggressive central bank interest rate hikes to combat out of control inflation and China’s COVID lockdowns will slow global growth and demand.

Meanwhile, an International Energy Agency (IEA) report on Thursday highlighted the dueling factors in the market, saying rising oil production in the Middle East and the United States and a slowdown in demand growth are “expected to fend off an acute supply deficit amid a worsening Russian supply disruption.”

Additionally, while most of the focus this week was on the European Union’s haggling over an embargo on Russian oil, the latest figures on U.S. inventories underscored the dynamics pushing prices higher.

Factors Affecting Supply

EIA Trims US Crude Production Forecasts

On the supply side, the EIA trimmed its U.S. crude production forecasts for 2022 and 2023. It now expects output in 2022 to average 11.9 million barrels per day (bpd) compared with its previous estimate of 12 bpd.

U.S. crude output is expected to rise 940,000 bpd to 12.85 million bpd in 2023, according to the same monthly report from the EIA. U.S. total petroleum…

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