Oil stabilizes as supply deficit counters demand fears

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LONDON — Oil prices stabilized on Friday and were set to end the week flat as the market balanced supply fears against renewed economic concerns in the United States and China.

Brent crude futures was down 5 cents, or 0.07%, at $74.93 a barrel by 1145 GMT. West Texas Intermediate (WTI) U.S. crude futures were up 4 cents, or 0.06%, at $70.91.

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Analysts forecast an emerging supply deficit for the second half of the year, pointing to an OPEC report on Thursday, which said the producer group expects July-December demand for its own crude to be 90,000 barrels per day (bpd) higher than previously projected.

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“The oil market is barrelling towards a supply deficit, assuming OPEC delivers on its latest production cuts,” said PVM oil market analyst Stephen Brennock.

Commerzbank analysts, meanwhile, said that “the emerging sizeable supply deficit confirms our expectation of rising oil prices during the course of the year.”

The Organization of the Petroleum Exporting Countries (OPEC) kept its global oil demand forecast for 2023 unchanged on Thursday, expecting economic risks to be offset by higher Chinese demand growth.

“Traders are waiting for one of two events to dictate the path of travel going forward; another bank failure or an OPEC+ production cut,” said Craig Erlam, senior markets analyst at OANDA.

There is mounting concern that the United States – the world’s biggest oil consumer – will enter recession, with talks over the U.S. government’s debt ceiling postponed and concern growing over another crisis-hit regional bank.

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Treasury Secretary Janet Yellen on Friday said that the U.S. faces financial and economic catastrophe if Congress fails to raise the debt ceiling.

And the U.S. Federal Reserve will probably need to raise interest rates further if inflation stays high, Fed Governor Michelle Bowman said on Friday, adding that data this month has not convinced her that price pressures are receding.

Meanwhile, a decline in new loans to businesses in China and weaker economic data there earlier in the week refocused doubts about its recovery from COVID restrictions driving oil demand growth.

China’s April consumer price data rose at a slower pace than in March, missing expectations, while deepening factory gate deflation suggested that more stimulus may be needed.

(Reporting Rowena Edwards in London Additional reporting by Yuka Obayashi in Tokyo and Andrew Hayley in Beijing Editing by Jason Neely and David Goodman)