Oil prices on track for third weekly profit in row

Oil prices fell in European trade for the first session in six days off ten-week highs on active profit-taking.

Oil prices are still heading for the third weekly profit in a row amid expectations of excessive market shortages in the fourth quarter of the year and amid OPEC optimism for global demand. 

Prices are also boosted by strong Chinese economic data, which renewed hopes for improving fuel demand, in turn overshadowing concerns about US oversupply as inventory and crude production increase.

Global Prices 

US crude fell 1.5% to $89.27 a barrel, with the highest since November 2022 at $91.11 a barrel, while Brent declined 1.25% to $92.70 a barrel, with the highest since November 2022 at $94.58. 

US crude rose 2.1% on Thursday, while Brent added 2.0%, the fifth profit in a row amid expectations of excessive shortages in the final quarter of the year. 

Weekly Trades 

Oil prices are up 2.5% so far this week on track for the third weekly profit in a row. 

Shortages

The International Energy Agency said the decision by Saudi Arabia and Russia to cut crude output by 1.3 million bpd until the end of the year will cause shortages in the fourth quarter of the year.

Bank of America analysts believe such cuts will send Brent prices above $100 by the end of the year.

Conversely, OPEC maintained its optimistic outlook for demand growth worldwide this year and next year,while also expecting flexible global economic growth despite higher interest rates.

OPEC specifically expects global demand on crude to rise by 2.25 million bpd in 2024, and to rise by 2.44 million bpd this year.

Chinese Demand 

Recent strong Chinese data indicated the economy is likely recovering in the third quarter of the year and exiting the recent struggles.

China's industrial production rose 4.5% in August, beating estimates of 3.9%, while retail sales rose 4.6% in August, beating estimates of 3.0%, as unemployment fell to 5.2%.

In another stimulus step to boost the economy, the People's Bank of China decided to lower the required cash reserves held by banks by 25 basis points to nearly 7.4%.

US Stocks

The Energy Information Administration reported a buildup of 4 million barrels in US crude stocks last week, while analysts expected a 2.2 million barrels drop.

US production also surged by 100 thousand bpd to a total of 12.9 million bpd, the highest since March 2020.