Oil prices rose on Friday, but are on the weekly slide amid fears of sharp interest rate hikes that will stall global growth and hit fuel demand.
Brent crude futures rose 24 cents, or 0.3%, to $91.08 a barrel as of 0315 GMT, but are down 1.9% for the week so far.
West Texas Intermediate (WTI) crude futures rose 10 cents, or 0.1%, to $85.20 a barrel, but were also down 1.9% on the week.
The recovery in oil prices this morning can only be explained as a short-term correction, as there is talk of the Fed raising interest rates by 75 or 100 basis points next week.
While the probability of a 100 basis point rate hike is relatively small, it will add uncertainty to market sentiment. So, there is a risk that oil prices may fall next week.
Both indicators were headed for a third consecutive weekly loss as the stronger US dollar was partially hurt, making oil more expensive for buyers of other currencies. The dollar index fell on Friday but held above 110, the high of last week.
Investors are gearing up for a rate hike in the US next week after data showed broadening core inflation and global recession concerns escalated.
The market was also shaken by the International Energy Agency’s (IEA) expectation of almost zero growth in oil demand in the fourth quarter amid a weaker demand outlook for China.
Oil is under downward pressure as China’s demand outlook remains a big question mark and the stance of the inflation-fighting Fed.
Analysts said sentiment has fallen due to comments from the U.S. Department of Energy that it is unlikely to attempt to refill the Strategic Petroleum Reserve by fiscal 2023.
On the supply side, the market found some support for waning prospects for the return of Iranian crude as Western officials downplayed hopes of reviving the nuclear deal with Tehran. Market tightening by the end of the year and the view that Brent will return to $100 a barrel in the fourth quarter are also supported.
OPEC+ members will likely discuss production cuts at the October meeting. Oil prices will likely rise in the fourth quarter as Europe faces an energy crisis due to uncertainty over oil and gas supplies from Russia.
