Oil prices rose in Asia on Friday despite weak market liquidity, after concerns over Chinese demand and the negotiation of a Western price cap on Russian oil.
Brent crude futures were up 28 cents, or 0.33%, at $85.62 a barrel at 0410 GMT.
West Texas Intermediate (WTI) crude futures rose 49 cents, or 0.49%, from close to $78.43 on Wednesday. No WTI deals were made on Thursday due to the US Thanksgiving holiday.
Both contracts are on their way to their third consecutive weekly decline, down about 2% on data on the easing of tight supply concerns.
Oil is trading slightly higher in illiquid holiday trade. Meaning that is likely to find some support from lower global interest rates.
G7 and European Union diplomats are discussing levels of between $65 and $70 a barrel over capping Russian oil prices, with the aim of capping Russia’s revenue without disrupting global oil markets for Moscow’s military action in Ukraine.
By the way, the market finds the price cap high, which reduces the risk of Moscow’s retaliation.
Russian President Vladimir Putin said Moscow would not supply oil and gas to any country participating in the price cap, as the Kremlin reiterated on Thursday.
Trade is expected to remain cautious ahead of the agreement on the price ceiling that will come into effect on 5 December, when the EU ban on Russian crude begins, and OPEC+’s next meeting on 4 December.
In October, OPEC+ agreed to cut its production target by 2 million barrels per day by 2023, and Saudi Arabian Energy Minister Prince Abdulaziz bin Salman said this week that OPEC+ is ready to cut production further if necessary.
Meanwhile, there are growing signs that a surge in COVID-19 cases in China, the world’s top oil importer, is starting to hit fuel demand, with traffic drifting down and implied oil demand around 13 million barrels per day, or 1 million bpd lower than average.
China on Friday reported a new daily record for COVID-19 infections as cities across the country continue to implement mobility measures and other restrictions to control outbreaks.
This, combined with the weakness in the US dollar, creates a headwind for oil demand, which creates a negative backdrop for oil prices.