Oil slipped on Friday but remained on track for its first weekly gain in three, supported by hopes that OPEC+ supply cuts and higher demand from top crude importer China will tighten the market in the second half of the year.
China’s refinery throughput rose in May to its second-highest total on record. OPEC raised its forecast for 2023 Chinese oil use this week and Kuwait Petroleum Corp’s CEO expects Chinese demand to keep climbing during the second half.
Brent crude fell 26 cents, or 0.3%, to $75.41 a barrel by 0810 GMT while U.S. West Texas Intermediate (WTI) crude slipped 24 cents, or 0.3%, to $70.38. Both benchmarks surged about 3% on Thursday.
There is robust support around $70-$71 and a supply deficit should kick in soon, said Tamas Varga of oil broker PVM.
Analysts also expect voluntary crude output cuts implemented in May by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, plus an additional cut by Saudi Arabia in July, to support prices.
Oil was also buoyed by a weaker dollar, which fell to a one-month low against a basket of currencies on Thursday. A weaker dollar makes oil cheaper for buyers with other currencies, which can boost demand.
A weak economic outlook, however, continues to dog market sentiment, with central banks not done with interest rate increases that could slow economic growth and reduce oil demand.
The Bank of England is set to raise interest rates by a quarter point next week. The European Central Bank lifted rates to a 22-year high on Thursday and the Federal Reserve signalled at least a half of a percentage point increase by year-end.