Oil prices rose nearly 4% to a five-week high on Friday and rebounded this week as OPEC+ decided to make the biggest supply cut since 2020 amid concerns over a possible recession and rising interest rates.
Oil rallied for the fifth day in a row, against the US dollar
A strong dollar suppresses demand for oil, making dollar-denominated crude more expensive for holders of other currencies.
Brent futures were up $3.50, or 3.7%, to settle at $97.92 a barrel, while West Texas Intermediate (WTI) crude was up $4.19, or 4.7%, to close at $92.64.
This was the highest close since August 30 for Brent and August 29 for WTI. The price surge pushed both benchmarks into technically overbought territory for the first time since August for Brent and June for WTI.
Both contracts posted their second consecutive weekly gains and their biggest weekly percentage gains since March this week; Brent rose about 11% and WTI 17%.
U.S. heating oil futures jumped 19% this week to their highest close since June, boosting the heating oil crack spread – a measure of refining profit margins – to its highest close on record, according to Refinitiv data going back to December 2009.
Analysts predict that Brent will rise above $100 per barrel in the coming quarters.
The OPEC+ cut came ahead of the European Union’s embargo on Russian oil and will further tighten supply in an already tight market.
OPEC production target cuts will give OPEC+ more supply option in the event of a crisis.
On Thursday, US President Joe Biden expressed disappointment with OPEC+ plans. US officials are considering all possible alternatives for Washington to prevent prices from rising.
The number of U.S. oil rigs, an early indicator of future production, fell two this week to 602, according to Baker Hughes Co.
Oil futures prices manage to gain an upward move despite widespread inflation across the US and Europe threatening the potential for a global recession where demand will be hit hard.
In Europe, disagreements among EU leaders over gas price containment and national bailouts have resurfaced, with Poland accusing Germany of “selfishness” in response to the winter energy crisis caused by Russia’s war in Ukraine.
