Oil rises on fall in dollar, but fears of demand hold gains IG News

Oil prices edged higher on Friday as the dollar eased, but gains were dented by recession fears and fresh concerns that the Covid outbreak will dent fuel demand in China.

Brent crude futures were up 65 cents, up 0.7 percent at $95.32 a barrel by 0155 GMT. The contract was on track to end the week with a decline of only 0.5 percent.

US West Texas Intermediate (WTI) crude futures climbed 66 cents, or 0.8 pc, to $88.83 a barrel, pushing the contract on course for a weekly gain of 1 pc.

Both contracts fell in early trade as the dollar moved higher and then reversed course when the dollar index fell 0.3 per cent to 112.67. A weaker dollar increases demand for oil as it makes the commodity cheaper for those holding other currencies.

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Analysts said while demand concerns are weighing on the market, supply is expected to remain tight, a floor below oil prices, Europe’s sanctions on Russian crude from December 5 and US crude stockpiles. with a decline in.

“We are not at a level that would encourage oil bulls to give up right now,” Stephen Innes, managing partner at SPI Asset Management, said in a note.

Fears of a recession in the United States, the world’s biggest oil consumer, increased on Thursday when Federal Reserve Chairman Jerome Powell said it was “too premature” to think about halting interest rate hikes.

“Anxieties of further rate hikes dampened expectations of an uptick in demand,” analysts at ANZ Research said in a note.

The Bank of England added to the gloom on Thursday, warning that it thinks Britain has entered recession and the economy may not grow for the next two years.

Analysts at ANZ pointed to signs of weak demand in Europe and the United States, with people driving lower and Amazon warning of weak sales, which could reduce demand for the distillate for its deliveries.

Underscoring demand concerns, Saudi Arabia cut its December official selling price (OSP) for its flagship Arabian light crude in Asia by 40 cents to a premium of $5.45 a barrel versus the Oman/Dubai average.

The cut was in line with forecasts from trade sources, which were based on a weak outlook for Chinese demand.

China stuck to its strict Covid-19 restrictions as cases on Thursday rose to their highest level since August. Earlier in the week investors thought the world’s biggest oil importer could move towards easing sanctions to boost the economy.


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