THE STAR – Oil climbed yesterday as the dollar eased and supply risks lingered, though recession fears and China’s COVID outbreaks kept a check on prices.
Brent crude futures were up USD1.84, or 1.9 per cent, to USD96.51 a barrel at 0740 GMT. The contract is headed for a weekly climb of more than 0.5 per cent.
United States (US) West Texas Intermediate (WTI) crude futures were up USD1.94, or 2.2 per cent, at USD90.11 a barrel, on course for a weekly gain of more than two per cent.
Both contracts rose as the dollar slipped. A weaker dollar boosts oil demand as it makes the commodity cheaper for those holding other currencies.
While demand concerns weighed on the market, supply is still expected to be tight, with Europe’s upcoming embargoes on Russian oil starting and a slide in US crude stockpiles.
“The increasingly gloomy macro outlook is providing some strong headwinds to the oil market and without the supply cuts announced by OPEC+ back in October, we would likely have been trading at much lower levels,” said ING’s Head of Commodities Strategy Warren Patterson.
The OPEC+ cuts have provided some stability to the market in the short term, though this is likely to change once the EU’s ban on Russian oil comes into force next month for crude and in February for refined products, he added.
Fears of a recession in the US, 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,” analysts at ANZ Research said in a statement.
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.
ANZ analysts pointed to signs of weaker demand in Europe and the US with people driving less and Amazon warning of weaker sales, which could dampen demand for distillate.
