Oil prices rose by 2% early on Friday, with Brent rebounding to above $100 per barrel at the end of a very volatile week, amid reports that President Joe Biden’s visit to Saudi Arabia today will not result in a public announcement of an imminent production increase.
As of 9:50 a.m. ET on Friday, WTI Crude was up 1.94% at $97.65, and Brent Crude was back above the $100 per barrel mark, at $101.17, up by 2.03%, erasing some of the weekly loss in the selloffs earlier this week.
Oil was supported on Friday by reports that the U.S. doesn’t expect the Saudis to immediately raise oil supply to the market—or even to announce a planned production increase.
There will be no public announcements about an oil supply rise during or after President Biden’s visit to Saudi Arabia, Bloomberg reported on Friday, quoting sources with knowledge of the matter. The U.S. doesn’t expect the Saudis to raise production immediately, a U.S. official told Reuters.
Oil was still down for the week after heavy selloffs in the previous sessions, fueled by new COVID measures in China, higher-than-expected U.S. inflation, and overall market concerns that the aggressive rate hikes from the Fed and other central banks would lead to a recession.
A bearish U.S. inventory report on Wednesday also contributed to the drop in oil prices in the middle of the week. Inventories increased in the U.S. for the week to July 8, with builds in both crude and gasoline stockpiles and a drop in implied gasoline demand to 8.06 million barrels per day (bpd), which is the lowest level seen for this time of the year in at least a decade.
A strong U.S. dollar has also weighed on oil prices this week.
At one point on Thursday, oil prices were trading at the lowest levels since the end of February, just before the Russian invasion of Ukraine.
By Tsvetana Paraskova for Oilprice.com
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The recent dip in oil prices was a temporary pause triggered by global oil traders' profit taking and recession concerns.
However, the market is coming to realize that in the current abnormal circumstances, a recession will neither cause a demand destruction nor lead to a decline in prices because of the tightness of the market, shortages and a fast-shrinking global spare oil production capacity including OPEC+’s.
That is why I am projecting that oil prices will soon resume their surge with Brent crude touching $120 a barrel before the end of the year.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London