Oil Prices Rebound After Hitting Four-Month Lows

Oil prices have seen a rise on Friday, recovering from their four-month lows. However, concerns about demand continue to weigh on the market, with oil on track for its fourth consecutive week of declines.

Brent Crude and West Texas Intermediate see gains

Brent crude, the international benchmark, has increased by 0.7% to $77.98 per barrel in early trading. Meanwhile, West Texas Intermediate, the U.S. standard, is up 0.8% at $73.47 per barrel.

Recent Decline and Contango Indicate a Well-Supplied Market

On Thursday, oil futures settled at their lowest level since early July, mainly due to a decline in U.S. industrial production reported in October. This decline has led to a situation known as contango, where spot prices and near-term futures are lower than futures expiring several months from now. This pattern suggests a well-supplied market.

According to Ole Hansen, head of commodity strategy at Saxo Bank, speculators who held a large long position and the smallest short position in 12 years had a strong sell reaction due to the weakened demand outlook.

Short-Lived Drop with a Forecasted Rebound in 2024

The majority of forecasts predict that the drop in oil prices may prove to be short-lived. Analysts believe there will be a rebound in 2024 due to stronger demand and potential supply cuts.

Chevron Receives Upgrade and Positive Outlook

Gerdes Energy Research has upgraded Chevron (ticker: CVX) to a Buy rating from Neutral and maintained their price target of $171. The research firm expects Chevron to generate around $137 billion of free cash flow over the period from 2024 to 2028 if oil prices remain between $70 and $75 per barrel, which is equivalent to 43% of its market capitalization.

Chevron's stock price has seen a slight increase, up 0.2% to $142.04 in premarket trading. Chevron was previously mentioned as a top stock pick earlier this month.