Oil prices saw weekly gains during the week ending May 31 due to concerns as to whether the OPEC+ group will agree to continue output cuts at the next meeting in June, growing tensions in the Middle East, uncertainties about the US Federal Reserve's (Fed) interest rate decisions, and the latest oil market outlook from the Energy Information Administration (EIA).
International benchmark Brent crude traded at $81.92 per barrel at 3.23 p.m. local time (1223 GMT) on Friday, rising by around 0.1% relative to the closing price of $81.84 a barrel on Friday last week.
West Texas Intermediate (WTI), the American benchmark, traded at $77.83 a barrel at the same time on Friday, an increase of about 0.14% from last Friday's session, which closed at $77.72 per barrel.
Both benchmarks started the week with marginal rises ahead of the next OPEC+ meeting on June 2, when market players will learn if the group will continue its output cut policy.
The producers, led by Saudi Arabia and Russia, will discuss whether to extend voluntary output cuts of 2.2 million barrels per day into the second half of the year.
In the current scenario, analysts anticipate that the group has reduced supplies by 5.8 million barrels per day (bpd), which corresponds to roughly 5.7% of total demand worldwide.
Tensions in the Middle East, home to important oil producers and trading routes, played a role in supporting the upward oil price trend during the week.
Despite international criticism and the International Court of Justice's (ICJ) plea on May 24 to stop Israel’s attacks in the Gaza Strip's southern city of Rafah, Israel bombed the tents of displaced Palestinians on May 26, killing at least 45 Palestinians, including 23 women, children, and the elderly, and injuring 249.
Furthermore, Israel’s sustained attacks have triggered concerns that Yemen's Houthis will persist with their attacks on commercial ships in the Red Sea, one of the world's busiest maritime routes for oil and fuel shipments, in solidarity with Palestinians in Gaza.
Furthermore, oil price dynamics during the week were impacted by market caution ahead of the US Federal Reserve's announcement on the start date of interest rate reductions.
According to data released by the New York-based Conference Board on Tuesday, the consumer confidence index, a leading indicator of consumer spending and economic activity, fueled market players’ fears that the Fed will cut its policy rate later than expected, putting downward pressure on oil prices.
However, data that showed a downward revision in the US GDP on Thursday increased analysts’ expectations that the Fed will cut interest rates this year, curtailing further price falls.
Further price rises were supported by data released by the EIA late Thursday. The agency indicated that US commercial crude oil inventories decreased by 4.2 million barrels during the week ending May 24, against market expectations of a fall of around 1.6 million barrels.
The EIA also found that US gasoline inventories increased by about 2 million barrels.
Conversely, the EIA’s data indicating a rise in US crude oil production by 6,000 bpd to around 13.52 million bpd eased supply concerns and limited the upward movement of oil prices.
By Duygu Alhan
Anadolu Agency
energy@aa.com.tr