Oil headed for the longest run of weekly gains in more than a year on an improving macroeconomic outlook and signs of a tighter market.
West Texas Intermediate edged below $80 a barrel on Friday, but has still rallied more than 3% this week for a fifth consecutive gain. In the US, economic growth exceeded expectations, and there’s speculation the Federal Reserve is near or at the end of its tightening cycle. Chinese authorities, meanwhile, have pledged more stimulus to support growth in the largest crude importer.
Crude holdings at the key US storage hub at Cushing, Oklahoma, have declined by 7.5 million barrels over the past four weeks, pushing stockpiles to their lowest since May. That’s helping to support a widening of WTI’s backwardation for its nearest two contracts, a bullish pricing pattern.
The rally in the US crude benchmark means that prices have all but erased the year’s losses after OPEC+ linchpins Saudi Arabia and Russia both curbed exports, with Moscow reaffirming its commitment to its obligations this week. That’s led banks including Standard Chartered Plc and UBS Group AG to forecast tightening global balances and higher prices over the rest of the year.
Recent economic data including the US GDP print suggests there’s “economic resilience, which provides further validation for soft landing hopes and suggests a much brighter demand outlook for oil,” said Yeap Jun Rong, market strategist for IG Asia Pte. There’s also “signs of improving dynamics in supply conditions” which is helping bearish sentiment to unwind, he said.
Russia reduced oil exports in July under commitments to OPEC+ and intends to do so again in August, Energy Minister Nikolai Shulginov said, according to a report from state-run news service Tass. In the the week to July 23, Russia’s seaborne flows from Baltic and Black Sea ports slumped to the lowest in seven months, according to vessel-tracking data monitored by Bloomberg.
US supermajor Exxon Mobil Corp. is set to report quarterly earnings Friday, offering traders insight into the outlook. Rival Chevron Corp. will also flesh out the details behind its figures for the period after an initial announcement.
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