SINGAPORE: Oil prices rose in Asia trade on Friday, rebounding from recent dips due to supply tightness and geopolitical tensions, Reuters reports, despite weakening demand in the US this week.
By 0630 GMT, Brent crude prices had risen $1.61, or 1.6 percent, to $105.47 per barrel, while US West Texas Intermediate crude futures had risen $1.43, or 1.5 percent, to $97.78 per barrel.
“Things are still bad on the economic front, but we are still in a structural deficiency for quick oil,” said Stephen Innes, managing partner at SPI Asset Management. “This implies physical purchasers will be there to support declines knowing the uncertainty of what lies ahead on the geopolitical front.”
According to Innes, investors are focused on the US Federal Reserve’s interest rate decision next week. Fed officials have indicated that the central bank will most likely hike rates by 75 basis points at its meeting on July 26-27.
“While 75 is likely, clarity will be critical, and any weakening in the rate hike outlook would be beneficial to global growth,” Innes noted.
While signals of falling US demand dragged on oil prices, sending benchmark futures down nearly 3% in the previous session, tight global supply kept the market buoyant.
“Despite the dramatic drop in oil prices, the supply issue remains worrisome.” “Until there is evidence of decreased demand, the (Ukraine) war-intensified supply shortage will keep oil prices high,” said Tina Teng, an analyst at CMC Markets.
WTI has taken a beating over the last two days as data showed that US gasoline consumption had dropped roughly 8% year on year in the midst of the peak summer driving season, owing to record pump prices.
In contrast, signals of strong demand in Asia propelled the Brent benchmark to its first weekly increase in six weeks.
Despite rising costs, demand for gasoline and distillate fuels in India reached new highs in June, with overall refined product consumption up 18 percent year on year and Indian refineries nearing their busiest levels ever, according to RBC analysts.
In a note, RBC analyst Michael Tran stated, “This signals much more than a great rebound from COVID-plagued years.”