Feb 24, 2023 11:49
Oil prices rose on Friday and were close to trading in the black for the week, as the prospect of deeper-than-anticipated cuts in Russian supplies outweighed worries that rising interest rates will dampen demand this year.
Crude prices marked a strong recovery from recent losses on Thursday as a Reuters report indicated that Russia plans to cut up to 25 percent of oil exports from its western ports in March, which is more than the 500 thousand barrels per day supply cut announced earlier.
By 21:06 ET, Brent oil futures increased 0.3% to $82.75 per barrel, whereas West Texas Intermediate crude futures increased 0.8% to $75.97 per barrel (02:06 GMT). Both contracts were trading down less than 0.5% for the week, having reduced their initial losses substantially.
The possibility of deeper Russian supply cuts helped markets overlook a larger-than-anticipated increase in U.S. petroleum inventories, which rose for the ninth consecutive week despite a slowdown in domestic consumption.
Fears of a further decline in petroleum demand weighed on oil prices this week, as hawkish signals and economic data flooded the market. The Fed's hawkish posture was strengthened by signs of resilience in the U.S. labor market and by high inflation readings for January and the fourth quarter.
The dollar's strength also weighed on crude markets, as a stronger currency makes oil more expensive for international buyers.
Focus is now on the Fed's preferred inflation gauge, the Personal Consumption Expenditures price index, for additional monetary policy indicators. It is anticipated that the reading will confirm that inflation remained elevated through January.
Thursday's downward revision of U.S. GDP data for the fourth quarter suggests that rising interest rates may have had a greater impact than anticipated on the U.S. economy thus far. While slowing growth portends unfavorably for crude demand, it could also reduce the Fed's room to continue raising interest rates.
This week's high inflation rates in Singapore, the Eurozone, and Japan have also raised concerns about tightening global monetary conditions. Oil prices are trading lower for the year amid persistent concerns of a global recession this year.
Despite this, oil investors continue to anticipate a rebound in Chinese demand after the world's largest oil importer relaxed the majority of anti-COVID measures this year.
However, early economic indicators from the country indicate that portions of the economy continue to struggle in the wake of the pandemic.
Feb 23, 2023 11:56
Feb 24, 2023 13:34