Oil rose by more than 3% on Friday as the dollar eased, with an EU ban on Russian oil looming large and investors weighing the prospects for an easing of China’s COVID curbs.
Though fears of global recession capped gains, Brent crude futures were up $3.29, or 3.48%, at $97.96 a barrel by 1203 GMT, set for a weekly gain of more than 2%.
U.S. West Texas Intermediate (WTI) crude futures were up $3.52, or 3.99%, at $91.69 and on course for a weekly gain of more than 4%.
Both contracts were supported by a weaker dollar, which can boost oil demand because it makes the commodity cheaper for those holding other currencies.
While demand concerns weighed on the market, supply is expected to remain tight because of Europe’s planned embargoes on Russian oil and a slide in U.S. crude stockpiles.
“The slight weakness in the dollar, the upcoming ban on Russian oil sales are certainly supportive as focus is shifting from recession fears to supply issues,” said PVM Oil Associates analyst Tamas Varga.
“The main catalyst, however, is reports that China may ease its zero-Covid restrictions, which would be a boon to its economy and oil demand.”
The EU ban on Russian crude imports is due to take effect from Dec. 5. Details of G7 price capaimed at alleviating constraints on Russian flows outside the EU are still under discussion.
China, meanwhile, is sticking to its strict COVID-19 curbs after cases rose on Thursday to their highest since August, but a former Chinese disease control official said substantial changes to the country’s COVID-19 policy are to take place soon.
On the bearish side, fears of a recession in the United States, the world’s biggest oil consumer, grew on Thursday after Federal Reserve Chairman Jerome Powell said it was “very premature” to be thinking about pausing interest rate hikes.
“The spectre of further rate hikes dimmed hopes of a pick-up in demand,” ANZ Research analysts said in a note.
The Bank of England warned on Thursday that it thinks Britain has entered a recession and the economy might not grow for another two years.
Underscoring demand concerns, Saudi Arabia lowered December official selling prices (OSPs) for its flagship Arab Light crude to Asia by 40 cents to a premium of $5.45 a barrel versus the Oman/Dubai average.
The cut was in line with trade sources’ forecasts, which were based on a weaker outlook for Chinese demand.
Looking into next week, investors are awaiting the U.S. Energy Information Administration’s short-term energy outlook and the November U.S. Consumer Price Index for insight on the pace of inflation. (Reporting by Julia Payne Additional reporting by Sonali Paul in Melbourne and Jeslyn Lerh in Singapore Editing by David Goodman)