Oil prices rose more than 2% on Friday (July 11) as the International Energy Agency (IEA) stated that the market is tighter than it appears, while US tariffs and the possibility of further sanctions against Russia were also in focus.

Brent crude futures closed up $1.72, or 2.5%, at $70.36 per barrel. US West Texas Intermediate crude rose $1.88, or 2.8%, to $68.45 per barrel. For the week, Brent rose 3%, while WTI recorded a weekly gain of about 2.2%.

The IEA stated that the global oil market may be tighter than it appears, with demand supported by peak refinery production in the summer to meet travel and power generation needs.

The September Brent contract is trading at a premium of about $1.20 to the October futures contract.

"The market is starting to realize that supply is tight," said Phil Flynn, senior analyst at Price Futures Group. US energy companies this week cut the number of oil and natural gas rigs operating for the 11th consecutive week, according to energy services firm Baker Hughes. The last time that happened was July 2020, when the COVID-19 pandemic slashed fuel demand.

Despite the tight short-term market, the IEA raised its supply growth forecast for this year while cutting its demand growth outlook, implying a market surplus.

"OPEC+ will soon and significantly increase oil supply. There is a threat of a significant oversupply. However, in the short term, oil prices remain supported," said Commerzbank analysts. OPEC+ is the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia.

Adding support to the short-term price outlook, Russian Deputy Prime Minister Alexander Novak said Russia would compensate for excess production against this year's OPEC+ quota in the August-September period. Another sign of strong short-term demand is the prospect of Saudi Arabia shipping about 51 million barrels of crude oil to China in August, the largest shipment in more than two years.

However, in the longer term, OPEC cut its 2026-2029 global oil demand forecast due to slowing Chinese demand in its 2025 World Oil Outlook released on Thursday.

Saudi Arabia's Energy Ministry said on Friday that the kingdom was fully complying with its voluntary OPEC+ production target.

On Thursday, both benchmark futures contracts fell more than 2% as investors worried about the impact of U.S. President Donald Trump's tariffs on global economic growth and oil demand.

Trump told NBC News on Thursday that he would make a "big statement" about Russia on Monday, without elaborating. Trump has expressed frustration with Russian President Vladimir Putin over the lack of progress in ending the war in Ukraine and Russia's escalating bombing of Ukrainian cities. (alg)

Source: Reuters