As the dollar weakened on Friday, oil prices began to rise, but gains were restrained by worries about a possible recession and new worries that Covid outbreaks could reduce China’s need for gasoline.
At 0155 GMT, Brent crude futures increased 65 cents, or 0.7%, to $95.32 a barrel. The contract was expected to lose only 0.5 percent by week’s end. The price of US West Texas Intermediate (WTI) crude futures increased by 66 cents, or 0.8 percent, to $88.83 a barrel, setting the contract up for a 1 percent weekly gain.
Both futures dropped early on as the dollar rose, but reversed around as the dollar index dropped by 0.3 percentage points to 112.67. A declining dollar makes oil more affordable for consumers using other currencies, which increases demand.
According to analysts, despite concerns about demand weighing on the market, supply is still anticipated to be constrained, providing a floor for oil prices as a result of Europe’s ban on Russian crude beginning on December 5 and declining US crude stocks. “We are not at levels that will encourage oil bulls to admit defeat just yet,” Stephen Innes, managing partner at SPI Asset Management, said in a note.
As the world’s largest user of oil, worries about a recession in the United States increased on Thursday after Federal Reserve Chairman Jerome Powell said it was “extremely early” to consider stopping interest rate rises.
The threat of more rate increases “diminished chances of a pickup in demand,” according to analysts at ANZ Research.
The Bank of England issued a warning on Thursday, saying that it believes Britain has entered a recession and that the country’s economy may not grow for another two years.
People driving less and Amazon warning of reduced sales are two indicators of weaker demand in Europe and the United States, which might reduce the need for distillate for its deliveries.