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Crude oil prices looked set to book a third consecutive week of declines today despite inching up on Thursday and early on Friday morning.
The change in direction reflects a change in traders’ focus as concern about supply security in the Middle East dissipates, to be replaced by a focus on demand prospects.
"The threat of disruptions to supplies from the Middle East continues to fall," ANZ analysts said in a note quoted by Reuters.
"The conflict remains well contained within Gaza, despite concerns it would escalate as neighbouring Arab nations show their displeasure," the analysts also said.
Bloomberg, meanwhile, reports that traders are currently focusing on high interest rates in the U.S. as one factor capping oil demand and also on a slowdown in refining activity in China. The reasons for that slowdown are lower margins as well as exhausted fuel export quotas.
“Investors are wary of a global economic slowdown possibly denting demand for fuel, and that’s completely negating the fear of conflict escalation in the Middle East,” Phillip Nova analyst Priyanka Sachdeva told Bloomberg.
In a commodity market update, ING analysts Warren Patterson and Ewa Manthey noted that Brent had this week slipped below $80 per barrel for the first time since July and that “Fundamentals are proving not to be as constructive as expected in the short term.”
The analysts went on to say that the demand weakness could become a problem for OPEC, especially if Saudi Arabia decides to end its voluntary output cuts at the end of the year. Expectations, however, are that the Saudis may well extend their cuts into 2024.
Citi, meanwhile, expects prices to stabilize and start rising again before long. "We expect prices to consolidate, and we maintain our near-term price forecasts with support expected to come from refinery maintenance easing and a shift in the risk-reward for investors following the recent sell-off," the bank’s analysts said in a note, quoted by Reuters.
By Irina Slav for Oilprice.com
Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.