Oil prices fell marginally on Friday as investors weighed optimistic demand forecasts from the OPEC producer group against mixed economic data in top importer China.
Brent crude fell 15 cents to $86.25 a barrel at 0515 GMT, while U.S. West Texas Intermediate crude futures were down 13 cents at $82.69 a barrel.
Both benchmarks have been on a sustained rally since June, with West Texas Intermediate crude (WTI) trading on Thursday at its highest this year and Brent hitting its best price since January.
“Oil markets may have been overbought from a multi-week rally, though OPEC+ output cuts and improved demand outlooks remained bullish factors,” said Tina Teng, a market analyst at CMC Markets in Auckland.
The Organization of Petroleum Exporting Countries (OPEC)said on Thursday it expects world oil demand to rise by 2.25 million barrels per day (bpd) in 2024, compared with growth of 2.44 million bpd in 2023. Both forecasts were unchanged from last month.
In 2024, “solid” economic growth amid continued improvements in China is expected to boost oil consumption, it added.
Market sentiment was also lifted by Thursday’s U.S. consumer prices data for July, which fuelled speculation the Federal Reserve is nearing the end of its aggressive rate hike cycle.
However, Teng also noted that “China’s sluggish economic data and the retreat on Wall Street weighs on risk sentiment, and a strengthened USD also pressured commodity prices”.
While customs data showed crude imports up year-on-year, China’s overall exports plunged 14.5% on last year, with monthly crude imports retreating from June’s near-record highs to the lowest levels since January.
Data this week also showed China’s consumer prices fell into deflation and factory gate prices extended declines in July, raising concerns about fuel demand in the world’s second-largest economy.
On the supply side, prices have been supported by extensions to output cuts by Saudi Arabia and Russia, alongside supply fears driven by the potential for conflict between Russia and Ukraine to disrupt Russian oil shipments in the Black Sea region.
Baden Moore, head of commodity and carbon strategy markets at National Australia Bank said crude markets were likely to show a supply deficit through the second half of this year, but it would be by less than OPEC’s forecast for a deficit of around 2 million barrels a day in the September quarter.
“Although our supply deficit forecast is lower, we expect it is enough to push prices over US$90/bbl through 2H23,” Moore added.