Investing.com -- Oil prices rebounded Friday, but were still on course to post hefty losses this week on concerns slowing U.S. growth and a tepid rebound in the Chinese economy will hit global demand.
By 08:55 ET (12:55 GMT), U.S. crude futures traded 2.7% higher at $70.41 a barrel, while the Brent contract rose 2.5% to $74.33 a barrel.
Despite these gains, the market is heading for a third straight weekly decline, the longest losing run this year, with the Brent contract more than 6% lower so far this week and the Nymex contract over 8% lower.
“Sentiment clearly remains negative, which suggests that there could be some further downside in the near term, although we would expect the market to find good support near the March lows of around US$70/bbl,” said analysts at ING, in a note.
“The market is in oversold territory and our balance sheet still shows that the market will be in deficit over 2H23, which should drive prices higher.”
The crude market has been battered on mounting concerns the U.S. economy, the largest energy consumer in the world, is heading for a recession on the back of aggressive monetary tightening by the Federal Reserve.
The Fed raised interest rates once again earlier this week, and although the U.S. central bank indicated it may pause in June, the damage could already be done, particularly given the turmoil in the banking sector.
The latest jobs report, released earlier Friday, showed that 253,000 people gained jobs in April, more than expected, but the jobs created in the two previous months were revised lower by nearly 150,000 jobs combined.
In Europe, the European Central Bank also lifted interest rates this week, and hinted of more hikes to come, while in China a private survey showed that growth in the country’s service sector unexpectedly slowed in April.
That reading, coupled with a surprise contraction in the manufacturing sector, added to concerns that a post-COVID economic rebound in the largest crude importer in the world was running out of steam.
Saudi Arabia lowered its official selling prices for all grades of its crude oil into Asia for June earlier this week, suggesting demand remains light.
This week’s weakness is occurring despite the voluntary output cut of just over 1 million barrels per day by the Organization of the Petroleum Exporting Countries and allies, known as OPEC+, starting at the beginning of May.
Expectations are starting to grow that the OPEC+ will be forced into further production cuts, particularly after it was announced that the cartel’s next meeting in Vienna in early June will be held in person.
“The last time the group held an in-person meeting was back in October last year when the group announced that they would reduce production targets by 2MMbbls/d,” added ING. “Clearly, if the current downward trend continues in prices, the group would likely be forced to make further supply cuts.”
The week ends with the release of Baker Hughes’ U.S. oil rigs count as well as CFTC positioning data, as usual.