Oil prices ended modestly higher on Friday after a strong US reading and a week of sharp declines to pre-Russian invasion of Ukraine levels, undermined by recession fears weighing on demand.
Posted at 6:44 p.m.
A barrel of Brent North Sea crude for October delivery rose 0.84% to $94.92.
A barrel of US West Texas Intermediate (WTI) for September delivery rose 0.53% to $89.01.
“We’ve seen US equities pull back a bit and oil prices pick up,” commented Matt Smith of Kpler, adding that the US jobs report for July, which showed much stronger hiring than expected, “reflected a economy in better shape” than anticipated. This pleaded in the short term for stronger demand for energy in the United States, which was positive for prices.
The US unemployment rate fell 0.1 points to 3.5%, returning to its pre-pandemic level, the Labor Department said on Friday. In July, 528,000 jobs were created, twice as many as expected.
But for the analyst, the upward movement in crude prices had more to do with technical factors.
“To be fair, as you end the week after a sharp decline in prices, brokers may have been looking to clean up their positions ahead of the weekend,” he said. “It’s a return of fortune for black gold after a very tough week,” summarized Matt Smith.
Oil prices remain close to “their lowest since the start of Russia’s war against Ukraine,” said Stephen Brennock, an analyst at PVM Energy.
However, Brent remains up by more than 21% over the year and US WTI by more than 18%.
“The prospect of lower demand in the context of a global economic slowdown” remains “at the heart of this downturn”, continued Mr. Brennock.
The Bank of England said on Thursday it expects the UK to be in recession for more than a year from the end of 2022. A ‘bleak prognosis’ came as the Bank announced its biggest ever interest rate hike since 1995.
During the week, fears for the global economy were such that prices ignored “the negligible increase in supply” from the Organization of the Petroleum Exporting Countries and their allies (OPEC +) on Wednesday, recalls Han Tan, analyst at Exinity.
The cartel agreed to an increase in its total production volume of just 100,000 barrels per day for September, a drop in the bucket for the market.
It “equivalent to only 0.1% of global oil demand”, estimates Stephen Brennock.