An Aramco employee walks near an oil tank at the Ras Tanura oil refinery and Saudi Aramco oil terminal in Saudi Arabia on May 21, 2018. Photograph: Ahmed Jadallah/Reuters. Obtaining licensing rights
September 29 (Reuters) – Oil prices fell on Friday but are on track for a 2% gain this week, driven by tight U.S. supplies and expectations of strong fuel demand in China during the Golden Week holiday.
Brent crude futures for December fell 14 cents to $92.96 a barrel by 0620 GMT, while Brent crude futures for November fell 38 cents to $95 a barrel before expiring on Friday.
US West Texas Intermediate crude fell nine cents to $91.62 a barrel.
After a nearly 30% jump in prices this quarter to their highest levels in a year, analysts are waiting to see if Saudi Arabia, the largest oil producer, might look to increase supply.
“Brent struggled to hold on to the gains made in the early part of the trading session. There is likely a reluctance among participants to rally too high at the moment with the market clearly in overbought territory,” ING analysts said in a note to clients.
“There is also potential concern that OPEC+, and specifically Saudi Arabia, could start easing cuts earlier than planned if prices rise too much,” they added.
A ministerial committee from the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, is scheduled to meet on October 4.
“Next week’s OPEC meeting will be a major market update with the likelihood of Aramco’s voluntary supply cuts becoming more likely,” National Australia Bank analysts said in a note to clients.
Improving macroeconomic data from China, the world’s largest oil importer, coupled with strong demand for fuel as the country begins the week-long Golden Week holiday on Friday, capped the decline in prices.
“Increasing international travel over the Golden Week holiday is boosting Chinese oil demand,” ANZ analysts said in a note to clients.
Domestic travel is also expected to boost demand, with data from flight app Umetrip showing the average number of daily flights booked is a fifth higher compared to Golden Week in 2019, before coronavirus.
Factory activity in China is likely to stabilize in September, a Reuters poll showed, adding to a series of indicators that the world’s second-largest economy is beginning to stabilize, which could further boost demand. Official data is scheduled to be released on Saturday.
Data on Thursday showed that the US economy maintained a fairly strong pace of growth in the second quarter and activity appears to have accelerated in the quarter, indicating potentially healthy demand for fuel.
The backdrop of tight supplies in the US provided further support to prices, as storage in Cushing, Oklahoma, the delivery point for US crude futures, reached its lowest levels since July 2022.
“US oil production is also expected to slow due to a decline in the number of drilling rigs. Low supply and record global demand of 103 million barrels per day could push the market into a deficit of more than 2 million barrels per day in the fourth quarter.”
(Reporting by Katya Golubkova) Editing by Jamie Freed and Sonali Paul
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