Oil rises after steep declines, but weekly losses still on tap – Investing NewsEverything

By Ambar Warrick

Investing.com– Oil prices rose on Friday after a series of bruising sessions and were set to end the week lower as hawkish signals from the Federal Reserve and rising COVID-19 cases in China brewed concerns over slowing global demand.

Crude markets plummeted on Thursday after hawkish comments from St. Louis Fed President James Bullard suggested that the bank intends to raise interest rates by at least another 150 basis points, citing a limited impact on inflation from recent hikes. This ratcheted up fears that U.S. economic growth will slow dramatically in the coming quarters, amid pressure from high interest rates and stubborn inflation.

London-traded rose 0.7%, while rose 1% by 00:29 ET (05:29 GMT). Both contracts sank 3.1% and 4.1% on Thursday, respectively, and were set to close the week 6% and 7% lower.

Oil prices were also dented by news of rising COVID-19 cases in China, which raised the prospect of more disruptive lockdown measures in the country.

The world’s largest oil importer is grappling with its worst outbreak in seven months, and is widely expected to clamp down further on economic activity to prevent the spread of infections.

Rising cases in China dispelled hopes that the country will scale back its strict zero-COVID policy in the near-term. A series of weak economic readings this week also showed that the world’s second-largest economy is struggling to shore up growth amid a slew of COVID lockdowns.

Slowing crude demand in China and rising interest rates were the two biggest weights on crude prices this year, dragging them well below a 14-year high hit in April.

These concerns also largely offset signs of tightening crude supply this week. Data released on Wednesday showed that U.S. fell by far more than expected in the prior week, despite an over 4 million barrel release from the Strategic Petroleum Reserve.

A previously announced supply cut by the Organization of Petroleum Exporting Countries and its allies was also seen going into effect this week, as several members of the cartel scaled back their oil shipments.

The OPEC also forecast weakening crude demand in the near-term, citing a potential recession threat from high inflation and rising interest rates. But the cartel said it stands ready to support crude prices with more supply cuts, if needed.

Western bans on Russian oil exports, which are set to kick in later this year, could also support crude markets by further tightening supply.