Oil prices rose nearly 3% to a nine-week high on Friday as supply concerns and technical buying outweighed fears that further rate hikes could slow economic growth and curb oil demand.
Brent futures rose $1.95, or 2.6%, to $78.47 a barrel, while West Texas Intermediate crude (WTI) rose $2.06, or 2.9%, to $73.86 a barrel.
This was the highest close since May 1 for Brent and since May 24 for WTI. Both indicators closed the week with gains of around 5%.
The rally over the past week has been quite strong, and with momentum, there are signs of an upside break following new cuts from Saudi Arabia and Russia. Investors are taking a short-term position because short-term moves are too volatile. After two months of price consolidation at roughly $73-77, Brent has entered technically overbought territory for the first time since mid-April.
The biggest oil exporters, Saudi Arabia and Russia announced new production cuts this week by OPEC+, the Organization of the Petroleum Exporting Countries (OPEC) and their allies, bringing total cuts to around 5 million barrels per day, or about 5% of global oil demand.
Sources close to OPEC said that OPEC will maintain its optimistic outlook on the increase in oil demand for next year. The OPEC+ output cuts are expected to tighten the market in the second half of 2023 by increasing supply gaps and supporting higher oil prices.
U.S. energy firms added oil and gas rigs for the first time in 10 weeks this week, due to the biggest weekly increase in gas rigs since October 2016, according to Baker Hughes Co.
In Norway, Equinor has stopped production at the Oseberg East oil field in the North Sea due to staff shortages.
The US dollar, which supports crude oil prices, slumped to a two-week low after data showed that job growth in the US was lower than expected but still strong enough to cause the Federal Reserve to continue raising interest rates later.
A weaker dollar makes crude oil cheaper for holders of other currencies, which could increase demand for oil. Higher borrowing costs can slow economic growth and reduce oil demand.
In Europe, decades of high inflation and the impact of the war in Ukraine are forcing companies to freeze hiring and layoffs.
In Germany, a rapid economic recovery looked less likely as the data showed a surprise drop in industrial production.
