Oil prices rallied on Friday as the dollar eased, but gains were limited by recession fears and new concerns that the COVID outbreaks will curb fuel demand in China.
Brent crude futures rose 65 cents to $95.32 a barrel at 0155 GMT. The contract is on track to close the week down just 0.5%.
West Texas Intermediate (WTI) crude futures rose 66 cents, or 0.8%, to $88.83 a barrel, putting the contract on course for a weekly gain of 1%.
Brent and WTI regained their losses.
Both contracts fell in early trade as the dollar moved higher, then turned around when the dollar index slipped 0.3% to 112.67. A weaker US dollar increases the oil demand as it makes commodities cheaper for those holding other currencies.
Analysts say that while demand concerns are weighing on the market, supply is still expected to be tight. This is forming a floor for the oil prices, with Europe’s embargo on Russian crude starting on Dec. 5 and U.S. crude stockpiles falling.
Fears of a recession in the United States, the world’s largest oil consumer, rose after Fed Chairman Jerome Powell said on Thursday it was “too early” to consider stopping interest rate hikes. Talk of further rate hikes dampened hopes for demand recovery.
Adding to the pessimism, the Bank of England warned on Thursday that the UK is in recession and thinks the economy may not grow for another two years.
Analysts pointed to signs of weaker demand in Europe and the United States, with people driving less and warning of weak business activity that could dampen distillate demand.
Underscoring demand concerns, Saudi Arabia cut the official December selling prices (OSP) of its flagship to Asia Arab Light crude by 40 cents to $5.45 a barrel, compared to the Oman/Dubai average.
The cut was in line with trade sources’ forecasts based on a weaker outlook for Chinese demand.
Investors had thought earlier in the week that China, the world’s largest oil importer, might turn to ease restrictions to stimulate the economy. China has adhered to strict COVID-19 restrictions as cases hit their highest level since August on Thursday.
