An Aramco employee walks near an oil tank at Saudi Aramco’s Ras Tanura oil refinery and oil terminal in Saudi Arabia. REUTERS/Ahmed Jadallah/File Photo
Oil prices slipped on Friday but were headed for a gain of 2 percent for the week driven by tight U.S. supply and expectations of strong fuel demand in China during the Golden Week holiday.
Brent December futures fell 14 cents to $92.96 per barrel at 0620 GMT, while ahead of expiring on Friday, Brent November futures dropped 38 cents to $95.00 per barrel.
U.S. West Texas Intermediate crude (WTI) slipped 9 cents to $91.62 per barrel.
Following a nearly 30-percent jump in prices this quarter to their highest in a year, analysts are waiting to see whether top producer Saudi Arabia might look to ramp up supply.
“Brent struggled to hold onto gains made in the early part of the trading session. There is likely reluctance amongst participants to push too much higher right now with the market clearly in overbought territory,” said ING Bank analysts in a client note.
“There is also possible nervousness that OPEC+ and specifically Saudi Arabia could start to ease cuts earlier than scheduled if prices move much higher,” they added.
READ: Oil cut extension raises risk of Saudi economic contraction this year
Oct 4 OPEC+ meeting
A ministerial panel of the Organization of the Petroleum Exporting Countries and allies, together called OPEC+, is due to meet on Oct. 4.
“Next week’s OPEC meeting will be a key update for the market with increasing probability the voluntary supply cuts by Aramco are reduced,” said National Australia Bank analysts in a client note.
READ: OPEC+ committee recommends to stay put on output policy
Improving macroeconomic data from China, the world’s largest oil importer, coupled with strong fuel demand as the country as it embarked on its week-long Golden Week holiday on Friday, limited price declines.
“(An) increase in international travel during the Golden Week holiday is boosting Chinese oil demand,” ANZ analysts said in a client note.
Domestic travel is also expected to boost demand, with data from flight app Umetrip showing the average number of daily flights booked is a fifth higher than for Golden Week in 2019, before COVID.
US economic growth
China’s factory activity likely steadied in September, a Reuters poll showed, adding to a run of indicators suggesting the world’s second-largest economy has begun to stabilize which could bolster demand further. Official data is due on Saturday.
READ: US economic growth trimmed on inventories; retains underlying momentum
The U.S. economy maintained a fairly solid pace of growth in the second quarter and activity appears to have accelerated this quarter, data showed on Thursday, pointing to possible healthy fuel demand.
A backdrop of tight supplies in the U.S. provided further price support, with storage at Cushing, Oklahoma, the delivery point for U.S. crude futures, already at their lowest since July 2022.
“U.S. oil production is set to slow as well due to falling rig counts. Lower supply and record global demand of 103mb/d could push the market into a deficit of more than 2mb/d in the last quarter.”