Brent oil headed for a third weekly gain as the market continued to tighten on the back of supply curbs from Saudi Arabia and Russia.
(Bloomberg) — Brent oil headed for a third weekly gain as the market continued to tighten on the back of supply curbs from Saudi Arabia and Russia.
The global crude benchmark traded near $94 a barrel Friday after closing up 2% a day earlier. The International Energy Agency and Organization of Petroleum Exporting Countries both warned this week that the market would be in deficit through year-end, helping push prices about 3% higher since last Friday’s close.
On the demand side, the picture has brightened on signs the US may be able to avoid a recession, while data from China on Friday beat economists’ estimates, suggesting the worst of the downturn is passing. The tightening market is also reflected in surging fuel prices, with diesel at a seasonal record in New York.
Crude in London has jumped more than 30% since mid-June, with analyst predictions of $100 a barrel becoming less rare. Still, there are technical indications that the rally is overdone. Brent’s 14-day relative strength index has been above the threshold signaling a potential pullback for much of the past two weeks.
“Crude flat price and structure continues to rip,” said Keshav Lohiya, founder of consultant Oilytics. “The crude market is now firmly in OPEC’s hands as it’s up to Saudi now when to start reversing some of these voluntary cuts.”
Widely watched timespreads continue to signal a supply shortfall. The gap between Brent’s two nearest contracts was 78 cents a barrel in bullish backwardation, the highest level since November.
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