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While fundamentals took over from the war-risk premium this week, pummeling oil prices, Brent crude was gaining over 4% by midday Friday, but analysts told Bloomberg that there is little chance for oil to top $90 in the current market atmosphere.
At 1:49 p.m. ET on Friday, Brent crude was up 4.31% at $80.76, for a $3.34-per-barrel gain on the day. West Texas Intermediate (WTI) was up 4.06% at $75.86, for a $2.96 gain on the day.
In an interview with Bloomberg earlier in the day, Lipow Oil Associates president Andrew Lipow said low prices this week were a “sign that the market is oversupplied at the moment”, citing more OPEC+ oil on the market in conjunction with the lifting of sanctions on Venezuela.
At the time of the interview on Friday morning, WTI was trading at around $74 per barrel, down from $90 a month earlier, prompting Lipow to predict that OPEC+ would suspend their production cuts through the first quarter.
A second analyst at CIBC Wood Gundy also told Bloomberg on Friday morning that oversupply and an expected slowdown in the U.S. economy would further weaken demand and push prices lower. CIBC Wood Gundy’s Andrew Pile told Bloomberg that WTI futures might reach as low as $70.
“It may be a tougher slog to get prices back up,” Pile said. “It may get up to $80, but I think getting back up to the highs we saw recently, north of $90, I think is out of the question for now.”
Just hours later, the market saw a major rebound for Brent and WTI.
Speaking to Reuters, Again Capital LLC’s John Kilduff attributed the sudden gains to “a natural profit-taking rebound and short covering, to a degree”.
Also contributing to the crude oil price gains were additional sanctions on entities facilitating the shipping of Russian oil above the G7 $60 price cap, but for now, the fundamentals remain the same.
By Charles Kennedy for Oilprice.com
Charles is a writer for Oilprice.com