Oil rises, but fears of weak demand cap gains

Oil prices continued to rise on Friday, but were heading for their first weekly loss in three weeks, as concerns about inflation and slowing global growth due to the closures in China to combat the pandemic outweighed the impact of concerns about dwindling fuel supplies from Russia.

Brent crude futures rose 85 cents, or 0.8 percent, to $108.30 a barrel by 0900 GMT. US West Texas Intermediate crude futures rose 64 cents, or 0.6 percent, to $106.77 a barrel.

However, both benchmark contracts are heading towards recording a weekly decline, with Brent crude expected to drop about four percent and US crude to drop about three percent.

The market remains volatile, with the European Union possibly imposing a ban on Russian oil supplies, leading to supply shortages and concerns about faltering global demand.

Stephen Innes, the managing partner at SBI Asset Management, said oil traders were looking for “a glimmer of light at the end of the bleak Chinese shutdown tunnel”.

“However, we always go back to the starting point with the comparison between the decline in the number of cases and the increase in the authorities’ adherence to the zero-Covid policy,” he added.

Inflation and a sharp rise in interest rates led to the rise of the US dollar to its highest levels in 20 years, limiting the gains in oil prices, as the rise in the dollar makes oil more expensive to buy in other currencies.

But analysts continue to focus on a possible European Union embargo on Russian oil after Moscow imposed sanctions this week on European units of state-owned Gazprom and after Ukraine blocked a major gas route.

A report issued by the International Energy Agency on Thursday highlighted contrasting factors in the market, saying that rising oil production in the Middle East and the United States and slowing demand growth “are expected to prevent severe supply shortages amid the increasing disruption to Russian supplies.”