NEW YORK – Oil prices rose about 4 percent on Friday, supported by real and threatened cuts to supply, although futures posted a second weekly decline as aggressive interest rate hikes and China’s Covid-19 curbs weighed on the demand outlook.
Russian President Vladimir Putin has threatened to halt oil and gas exports to Europe if price caps are imposed and a small cut to Opec+ oil output plans announced this week also supported prices.
Brent crude rose $3.69 (R63.87), or 4.1 percent, to settle at $92.84 a barrel. US West Texas Intermediate (WTI) crude rose $3.25, or 3.9% to settle at $86.79 a barrel.
“Over the coming months, the West will have to contend with the risk of losing Russian energy supplies and oil prices soaring,” said Stephen Brennock of oil broker PVM.
Pressured by worries about a recession and demand, Brent is down sharply from a surge in March close to its all-time high of $147 after Russia invaded Ukraine.
The Group of Seven is trying to find ways to limit Russia’s lucrative oil export revenue in the wake of the invasion. A price cap that G7 countries want to impose on Russian oil to punish Moscow should be set at a fair market value minus any risk premium resulting from its invasion of Ukraine, a US Treasury Department official told reporters on Friday.
Despite Friday’s bounce, both crude benchmarks were headed for a weekly drop, with Brent down about 0.2 percent on the week after at one point hitting its lowest since January. WTI posted a weekly decline of 0.1 percent.
If the US Federal Reserve was able to keep the unemployment rate below 5 percent, it could be aggressive on bringing down inflation but after that trade-offs would appear, Fed Governor Christopher Waller said on Friday.
The Fed should be aggressive with rate hikes while the economy “can take a punch”, he said.
A US Department of Energy official said the White House was not considering new releases from the US Strategic Petroleum Reserve (SPR) at this time beyond the 180 million barrels that President Joe Biden announced months ago. Earlier, Energy Secretary Jennifer Granholm told Reuters that the administration was weighing the need for further SPR releases.
“The White House is backing off another release from the SPR,” said Phil Flynn, an analyst at Price Futures Group. “Looks like a lot of the fears the market had previously have gone away.”
US oil rigs fell five to 591 this week, their lowest since mid-June, energy services firm Baker Hughes Co said, as the growth in the rig count and production has slowed despite relatively high energy prices.
REUTERS