In early Asian trade on Friday, oil markets made a partial recovery as traders engaged in short-covering activities before the weekend.
However, the gains were limited by uncertainties surrounding the U.S. debt ceiling and renewed fears of a regional banking crisis in the United States.
Interestingly, the oil market largely disregarded the global oil demand forecast for 2023 issued by the Organization of the Petroleum Exporting Countries (OPEC).
The forecast projected an increase in oil demand from China, the world’s largest oil importer.
Despite this positive outlook, market participants seemed to focus more on the immediate uncertainties and potential risks, leading them to overlook the optimistic long-term projections.
Brent crude futures experienced an increase of 36 cents, or 0.5 per cent, reaching $75.34 per barrel by 0051 GMT. Similarly, U.S. crude futures gained 41 cents, or 0.6 per cent, reaching $71.28 per barrel.
These price movements indicate a rebound from the losses of approximately 3-4 per cent incurred over the past two trading sessions.
Despite the recovery, both benchmarks were on track for minimal changes for the week, following three consecutive weeks of decline.
The U.S. government has expressed its intention to purchase oil when prices consistently remain at or below the range of $67 to $72 per barrel. This statement adds another layer of uncertainty to the market, contributing to cautious investor sentiment.
Investor caution persists due to uncertainties surrounding the U.S. debt ceiling and fears of a regional banking crisis. Additionally, concerns about weak demand in China contribute to the cautious sentiment.
China’s April consumer price data shows slower growth than expected, and factory gate deflation worsens, indicating the need for additional stimulus to bolster the post-COVID-19 economic recovery, which remains uneven.