Oil prices rebounded last week, not just because the Federal Reserve cut rates, but also due to a combination of a reduction in supply, a tropical storm along parts of the US Gulf Coast, and the rapid rise in tensions between Israel and Lebanon.
Pressure from Gaza persisted, and prices jumped more than 3% over the week, as sentiment reversed from the previous couple of weak weeks.
By Friday’s close, US West Texas Intermediate crude ended at $US71.77 a barrel, while Brent, the global benchmark, finished at $US74.72.
A fall in bond yields and weakness in the US dollar were reversed on Friday, with the 10-year bond yield rising to more than 3.74% and the greenback strengthening as well.
Oil market traders largely ignored last week’s mixed economic data from China.
Despite optimism from some oil market analysts, Commerzbank revised down its oil price forecast for the end of 2024 as the Organisation of the Petroleum Exporting Countries (OPEC) and allied producers prepare to increase output starting in December.
The International Energy Agency expects an oversupply of around 1.8 million barrels in the first quarter of 2025, with similar surpluses expected in the following quarters, the bank noted.
Commerzbank stated that the implied market balance for the coming year shows no room for a supply expansion from OPEC+. On the contrary, demand for oil from OPEC+ is expected to decline next year, as oil supply outside OPEC+ is likely to increase more than global demand, the bank added.
As a result, OPEC+ may have little choice but to cancel the planned supply increase entirely. As long as this plan looms over the oil market, prices are unlikely to recover significantly, according to Commerzbank.
The bank now expects Brent crude to be $US75 a barrel by the end of the year, down from $US80. For 2025, Commerzbank revised its Brent forecast down by $US10 to $US80.
The number of crude oil rigs in operation across the US remained unchanged at 488 in the week ending September 20, maintaining the highest level since mid-June. The total number of rigs in operation, 588, was down by two compared to the previous week. Gas rigs fell by one to 96, and there was one fewer miscellaneous rig in operation.