While oil prices climbed Friday to notch up a weekly gain of nearly 4%, the International Energy Agency again cut its demand estimates for 2019 and 2020, news that was ignored by traders for the time being.
The partial progress in US-China trade negotiations eased worries about energy demand, and news of an explosion on an Iranian tanker fed tensions in the Middle East boosted prices.
West Texas Intermediate crude for November delivery jumped $US1.15, or 2.2%, to settle at $US54.70 a barrel in New York—a two-week high and 3.6% higher for the week.
The global benchmark, December Brent crude jumped $US1.41, or 2.4%, to $US60.51 a barrel in Europe, for a weekly gain of 3.7%.
Both contracts had racked up losses in each of the previous two weeks in a row.
Baker Hughes on Friday reported that the number of active US oil rigs in the US rose by two to 712. That followed declines in each of the last seven weeks. The total active US rig count, meanwhile, also edged up by one to 856.
US oil production was estimated at 12.6 million b/d a day last week by the US Energy Information Administration, up 200,000 barrels on the previous week. US oil stocks rose by nearly 3 million barrels to just over 525 million, 2.5% above the five year average for this time of year (mid Fall).
But the big concern is the International Energy Agency’s move to cut its oil demand growth forecasts for this year and next thanks to expectations of more weakness in major world economies.
The IEA cut its estimates for 2019 by 65,000 barrels a day (b/d) to growth of 1 million b/d in its monthly oil market report.
For 2020 it cut its estimate 105,000 b/d to 1.2 m b/d. “We expect growth in 2019 to be the weakest since 2016, following evidence of a slowdown in several major consuming regions and countries, including Europe, India, Japan, Korea and the US,” the IEA said.
Total worldwide demand is expected to tally just over 100m b/d this year and 101.5m b/d next year.
Global oil supply slid by 1.5 million b/d last to 99.3 million b/d after those drone attacks on Saudi oil facilities halved the kingdom’s production for a short while. Production is now reportedly back to pre-attack levels.
The IEA had a warning about the message from those attacks.
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The IEA said that the attacks on Saudi Arabia should not be “shrugged off” even if prices return to pre-attack levels (which they did on Friday).
“Further incidents of this nature in the strategically important Gulf region could happen and cause even greater disruption,” it added. “We might have quickly returned to business as usual, but the security of supply remains very relevant,” the IEA added.
Now that prices are back around pre-attack levels the focus will now return to production levels with oversupply still evident.
