Oil prices marked time in Asia on Friday after a strong rise in the previous session on a weaker dollar and a fall in U.S. crude stocks and were set for modest weekly gains ahead of a highly anticipated U.S. monthly jobs report.
U.S. West Texas Intermediate (WTI) crude futures were up 17 cents, or 0.25%, at $69.92 a barrel.
Both benchmark oil contracts jumped 2% on Thursday, putting WTI on track to climb 1.6% for the week, while Brent headed for a 0.5% weekly gain.
The move down in WTI was likely due to traders squaring positions ahead of the U.S. non-farm payrolls report for August, on worries the report may be weaker than consensus forecasts, said Stephen Innes, managing partner at SPI Asset Management.
However, some analysts see room for further oil price gains amid tightening crude supplies and signs of recovering fuel demand.
“With an oil market still strongly in deficit for the remainder of the year, oil seems poised to rally further as OPEC+ signals discipline in easing cuts and as U.S. stockpiles continue to decline,” Edward Moya, senior market analyst at OANDA, said.
The increase this week has also come amid a falling U.S. dollar, which makes oil cheaper in other currencies, and the fallout from Hurricane Ida.
“The prolonged U.S. Gulf production and Louisiana refining capacity outages, which are bound to carve a bigger hole in the already diminished U.S. oil stockpiles, as well as data showing continued strong domestic fuel demand recovery are supportive factors,” said Vandana Hari, energy analyst at Vanda Insights.
About 1.7 million barrels per day of oil production remains shut in the U.S. Gulf of Mexico, with damage to heliports and fuel depots slowing the return of crews to offshore platforms, sources told Reuters.
Offsetting the supply impact, oil demand has been curbed as extended power outages are slowing the reopening of refineries that were shut in Louisiana.
Demand is likely to be in focus after the Organization of the Petroleum Exporting Countries and allies, together called OPEC+, this week stuck to their plan to add 400,00 barrels per day (bpd) back to the market over the next few months amid surging COVID-19 cases, analysts said.
“The focus shifts again to the shape of the demand recovery, with some concern that it will be challenging to keep the market in deficit next year if OPEC+ continues to add supply at the anticipated 400,000 bpd pace,” Innes said.