Oil on track for fifth week of gains

Oil prices were steady, but on track for a fifth straight week of gains with investors optimistic healthy demand and supply cuts will keep prices buoyant.

Risk appetite in wider financial markets has been fuelled by growing expectations that central banks such as the Fed and European Central Bank are nearing the end of policy tightening campaigns, boosting the outlook for global growth and energy demand.

Bolstered by supply cuts from the OPEC+ alliance announced earlier this month, both oil benchmarks are on track for a 3.6% weekly increase – a fifth straight week of gains.

Bullish demand expectations were boosted on Thursday after U.S. second-quarter gross domestic product grew at a forecast-beating 2.4%, supporting Federal Reserve Chairman Jerome Powell’s view that the economy can achieve a so-called "soft landing.”

Investors are warming up to the idea of peak rates getting ever closer, while it is looking increasingly probable that the United States will avoid recession, said PVM analyst Tamas Varga.

Fresh data released on Friday showed some of the euro zone’s top economies displayed unexpected resilience in the second quarter even as a raft of indicators pointed to renewed weakness ahead, as manufacturing ails and services slow.

Meanwhile, policymakers in China have pledged to step up stimulus measures to invigorate the post-COVID recovery after the world’s second-largest economy grew at a frail pace in the second quarter.

On the supply side, evidence of tightening is mounting, given declining US inventories and Saudi Arabia’s voluntary cut of 1 million barrels per day, Commerzbank analysts said, highlighting this month could have seen OPEC oil production plunge to its lowest level since the autumn of 2021.

It would "take a brave man to bet against re-visiting the 2023 summit set at $89.09” a barrel for Brent oil in January, PVM analyst Tamas Varga added.