Despite economic worries and China’s COVID outbreaks, oil prices were held back on Friday as the currency weakened and supply issues persisted.
Brent oil futures were up $1.84, or 1.9%, to $96.51 a barrel at 07:40 GMT. The contract should rise by more than 0.5% weekly. The price of American West Texas Intermediate (WTI) crude was trading at $90.11 a barrel, up $1.94 or 2.2%, and on track to record a weekly gain of more than 2%. Both contracts rose as the value of the dollar declined. Demand rises when oil prices fall as consumers with foreign currencies find it more inexpensive.
Demand concerns weighed on the market, but supply should remain tight owing to the upcoming start of European oil embargoes against Russian oil and a drop in U.S. crude reserves.
What Do Experts Predict?
According to Warren Patterson, director of commodities strategy at ING., the oil market is facing some significant headwinds. If not for the production limits set by OPEC+ back in October, we would likely be trading at much lower levels. The OPEC+ cuts have stabilized the market temporarily. Still, if the E.U. imposes an embargo on Russian oil starting February for refined goods next month for crude, this will change.
Worries of a recession in the United States, the world’s largest oil consumer, grew on Thursday after Federal Reserve Chairman Jerome Powell said it was much too early to think about suspending interest rate increases. The threat of higher rates reduces the likelihood that demand will grow.
The Bank of England warned that the U.K. has entered a recession and that the nation’s economy might not grow for another two years in a statement released on Thursday. According to ANZ analysts, fewer people are driving, and Amazon’s (NASDAQ: AMZN) warning of lower sales are two signs of weak demand in Europe and the U.S., which might shrink the market for distillate.