Oil prices have steadied today, with both major benchmarks on course for a modest weekly gain after a sustained slump from waning global demand.
Brent Crude has gained 0.22 per cent in Friday afternoon’s session, with oil now priced at $75.84 per barrel, while WTI Crude has enjoyed a mild 0.33 per cent uptick – priced at $70.84 per barrel.
After being heavily bruised by lowered demand expectations in recent weeks, oil gained nearly three per cent on both major benchmarks yesterday amid hopes of increased Chinese demand.
China’s refinery production levels rose in May to its second-highest total on record, with expectations from both OPEC and the IEA that rebounding demand will characterise oil price growth in the second half of the year.
Markets have been treading water in recent days with prices balanced by growing Chinese demand and OPEC+ supply cuts propping up prices, and gloomy global economic data with the prospect of further interest rate hikes stalling any future rallies.
How will oil prices impact central banks’ interest rate decisions?
The Bank of England is expected to raise interest rates a quarter of a percentage point next week, as experts warn UK inflation is out of control.
This follows the European Central Bank lifting rates to a 22 year high yesterday.
Meanwhile, the world’s most influential central bank, the US Federal Reserve, has indicated at least a half of a percentage point increase by the end of the year.
Craig Erlam, senior markets analyst said: “The price has held in its lower 2023 range – roughly $70-$80 in Brent – but it did test the lower end of this earlier in the week. Going forward, the focus will likely remain on interest rates and just how much they will threaten economies into year-end and perhaps what else China has up its sleeve to support the economy.”
“OPEC’s focus on supply management will likely enforce the view of a soft floor under the market, currently around $72 in Brent, while an upside break seems equally unlikely as long the focus remains on a weakening economic outlook,” added Ole Hansen, head of commodity strategy at Saxo Bank.