A Look Back

Oil prices rose nearly 2% on Friday to record a fourth consecutive weekly gain, buoyed by growing evidence of supply shortages in the coming months and rising tensions between Russia and Ukraine that could further hit supplies. Brent crude futures rose 1.8%, to settle at $81.07 a barrel, with a weekly gain of about 1.2%. U.S. WTI crude ended 1.9%, higher at $77.07 a barrel, its highest since April 25.

Disruptions in key Libyan and Nigerian suppliers lifted the price in tandem with the longer-term output cuts set by the world’s leading exporters, Saudi Arabia and Russia. Russia hit Ukrainian food export facilities for a fourth day in a row on Friday and practiced seizing ships in the Black Sea, in an escalation of tensions in the region since Moscow’s withdrawal this week from a U.N. brokered safe sea corridor agreement.

A Look Ahead

Oil prices fell early this morning, with WTI trading down 0.70% at $76.53 and Brent sinking 0.68% to $80.52. The dip in prices was driven by concerns over further interest rate hikes in both the United States and Europe.

While interest rate hikes will add downward pressure to prices, plenty of analysts remain convinced oil markets will tighten. The dip comes ahead of central bank updates due in the United States and Europe, as traders calculate the chances for more rate hikes down the road. While another Fed rate hike this week may drive some short-term price volatility, we expect tightening market conditions on OPEC’s supply cuts and increasing market speculation of further stimulus in China to continue to push prices higher through 3Q23.

Goldman Sachs expects record demand in oil markets to drive crude prices higher in the near term. A report by the International Energy Agency (IEA) predicts oil demand would hit a record high this year, though broader economic headwinds and interest rate hikes meant the increase would be slightly less than previously anticipated.