Oil prices rose in Asian morning trade on Friday, but were set for a third straight week of losses after markets witnessed dramatic drops on fears of a weakening U.S. economy and slowing Chinese demand.
U.S. West Texas Intermediate was up $1.70, or 2.48%, at $70.40 a barrel after four straight days of losses.
For the week, Brent was set to close down 8.5%, while WTI was set to close 10.3% lower.
“It has been a double whammy for oil prices,” said Jun Rong Yeap, a market strategist at IG in Singapore.
“Renewed U.S. banking fallout (has prompted) fears of a wider contagion and amplifying recession talks, while a surprise contraction in China’s manufacturing activities pushed back against reopening optimism on oil demand outlook,” he noted.
Worries of a U.S. regional banking crisis persisted after PacWest Bancorp said it planned to explore strategic options.
In China, factory activity unexpectedly contracted in April as orders fell and poor domestic demand dragged on the sprawling manufacturing sector.
Service activity in China grew through April, though the rate of this expansion has slowed, data showed on Friday.
However, expectations of potential supply cuts at the next OPEC+ meeting in June have provided some support to prices, said Kelvin Wong, a senior market analyst at OANDA in Singapore.
“Yesterday’s steep intraday decline in WTI crude futures has managed to stall at a key major support of US$61.85… market participants seem to have implied that it’s a potential ‘floor’ that OPEC+ has created”, said Wong.
Traders are focused on the release of U.S. employment data for April later in the day, hoping it could help gauge the health of the economy, as well as comments on monetary policy from St. Louis Fed President James Bullard and Minneapolis Fed President Neel Kashkari at the Economic Club of Minnesota.
Investors now broadly expect the Fed to pause rate hikes at its June meeting, after the U.S. central bank dropped language that it “anticipates” further rate increases from its policy statement.