Oil set to snap two-week losing streak on tightening supplies

Oil, miniatures of oil barrels, oil pump jack and U.S. dollar banknote are seen in this illustration taken, June 6, 2023. REUTERS/Dado Ruvic/Illustration/File photo

SINGAPORE  – Oil prices were set to snap a two-week losing streak as they rose for a fourth consecutive session on Friday due to tightening supplies and expectations of the OPEC+ group of oil producers extending output cuts to the end of the year.

Major benchmarks rose slightly in early Asian trade, with the U.S. West Texas Intermediate crude (WTI) up 7 cents, or 0.1 percent, at $83.70 a barrel, while Brent crude was also up 7 cents at $86.90/bbl as of 0107 GMT.

Analysts expect Saudi Arabia to extend a voluntary oil production cut of 1 million barrels a day into October, adding to cuts by the Organization Petroleum Exporting Countries and allies, known as OPEC+.

“We continue to expect cuts to be extended, with prices above $90/bbl (on a sustained basis) required to draw OPEC supply back to market, as well as incentivize U.S. shale producers to increase drilling activity,” the National Australia Bank said in a client note on Friday.

U.S. crude inventories fell by a more-than-expected 10.6 million barrels last week, depleted by high exports and refinery runs, government data on Wednesday showed. Commercial crude oil inventories have plunged by 34 million barrels since the middle of July.

Change in U.S. inventories is often viewed as a proxy for global demand-supply balance. Continuous depletion is interpreted as a reflection of potential supply deficit.

“Signs of stronger demand were also evident in the product market, with implied gasoline demand (on a four-week basis) pushing higher for the first time in three weeks,” ANZ said in a research note on Friday.