Oil Heads for Fourth Weekly Advance as Global Market Tightens Up

(Bloomberg) -- Oil headed for a fourth straight week of gains, supported by signs of a tightening global market and weaker dollar.

West Texas Intermediate rose toward $83 a barrel, taking its weekly advance to about 2% and the longest winning run since June. The rally had been driven by improving fundamentals after OPEC+ cut supplies, with brisk buying seen in both Europe and Asia. Key market timespreads signal firmer conditions.

The Organization of Petroleum Exporting Countries said Thursday the market was set for a hefty supply deficit that’ll widen as the year progresses. Earlier this week, Fatih Birol, head of the International Energy Agency, said demand may top supply in the second half. The IEA monthly outlook is due later Friday.

Crude has rebounded strongly since hitting a 15-month low in March as OPEC and its allies surprised the market with a significant output cut. The move lifted prices by the most in a year, punishing speculators betting oil would fall. The gains have also been driven by declining US stockpiles, weaker flows from Russia, and interruptions to pipeline supplies from Iraqi Kurdistan.

The dollar is on course for a fifth consecutive weekly decline — the longest losing streak in almost three years — amid speculation that the Federal Reserve is close to ending its rate-hike campaign. A weaker greenback makes commodities priced in the US currency cheaper for many buyers.

“Oil prices have managed to deliver a new, higher high this week, reflecting buyers in control,” said Yeap Jun Rong, market strategist for IG Asia Pte. Tighter supply, a weaker US dollar, and optimism about the outlook for Chinese demand were serving as support for crude, he said.

In China, the world’s largest crude importer, data this week showed oil imports in March swelled to the most in almost three years, underpinned by record Russian flows. On Friday, People’s Bank of China Governor Yi Gang said that the nation’s economy is expected to achieve about 5% growth this year.

WTI’s prompt spread — the difference between its two nearest contracts — was 11 cents a barrel in backwardation, a bullish pattern. That’s compares with 16 cents a barrel in contango, the opposite structure, a month ago.

©2023 Bloomberg L.P.