Oil is up but are poised for a third straight week of down
Oil prices have experienced a tumultuous period, with a third week of losses looming after a big drop. Concerns have been raised over fears of a weakening US economy and a slowdown in Chinese demand, leading to a flurry of sales.
The price of Brent oil rose by 1.24 dollars to reach 73.74 dollars per barrel, while US West Texas Intermediate increased by 1.66% to $69.69, following four days of decline.
The week ended with a 7% fall in benchmark Brent, while WTI suffered a 9% drop.
In addition to the challenges posed by the pandemic, there is also a disconnect between the oil balance and oil prices, which may be temporary. This may lead to instability in the US banking sector and recession risks, as seen by the recent strategic directions of PacWest Bancorp. Services activity in China did show signs of improvement through April. Still, the pace of expansion has slowed considerably.
Investors have found some reassurance in the potential supply cut that may be announced at the next OPEC+ meeting in June. Meanwhile, China is returning to pre-pandemic levels of air travel, with 9.43 million domestic air passengers recorded during the recent five-day Labor Day holiday.
Global oil consumption should rise by 2 million barrels per day this year, reaching a record 101.9 million barrels per day, according to the International Energy Agency.
While the situation remains uncertain, the Saudis and their OPEC+ counterparts should take action to prop up prices if fundamentals deteriorate. Investors now anticipate that the Fed will hold off on raising rates at its June policy meeting. As the world continues to grapple with the impact of the pandemic, the oil market is likely to remain volatile soon.
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