Oil prices rose on Friday after a U.S. official told Reuters an immediate Saudi oil output boost is not expected, with further support from indications that the U.S. central bank could raise interest rates less aggressively than anticipated.
WTI crude rose $1.55, or 1.60%, to $97.97.
The U.S. Federal Reserve’s most hawkish policymakers on Thursday said they favoured a rate increase of 75 basis points at its policy meeting this month, not the bigger increase traders had priced in after a report on Wednesday showed inflation was accelerating.
The interest rate uncertainty and weak economic data led to Brent and WTI shedding more than $5 on Thursday to below the closing price on Feb. 23, the day before Russia invaded Ukraine, though both contracts clawed back nearly all the losses by the end of the session.
U.S. President Joe Biden is set to land in Jeddah later on Friday, and had been expected to call for Saudi Arabia to pump more oil.
But the United States does not expect Saudi Arabia to immediately boost oil production and is eyeing the outcome of the next OPEC+ meeting on Aug. 3, a U.S. official told Reuters on Friday.
The comment comes at a time when spare capacity at members of the Organization of the Petroleum Exporting Countries (OPEC) is running low.
Still, the U.S. could secure a commitment that OPEC will boost production in the months ahead in hopes that it will provide a signal to the market that supplies are coming if necessary.
“[Biden’s] case will have been weakened significantly by the latest price rout,” said Stephen Brennock of oil broker PVM.
Analysts expect continued pressure on oil from concerns over the global economy.
“Brent has dipped noticeably below $100 per barrel this week. It is likely to continue sliding given that the recession fears will presumably not abate for the time being,” Commerzbank said in a note.
Bearish market sentiment has also followed renewed COVID-19 outbreaks in China, which have hampered a demand recovery.
China’s refinery throughput in June shrank nearly 10% from a year earlier, with output for the first half of the year down 6% in the first annual decline for the period since at least 2011, data showed on Friday.