Oil prices rose about 1.5% on Friday, but are due to lose ground for the first time in three weeks due to concerns about inflation and China’s COVID lockdown slowing global growth.
U.S. West Texas Intermediate (WTI) crude futures gained 1.3% to $107.5 a barrel in the early hours of Friday, while Brent crude futures increased by nearly 2%.
Brent and WTI, however, looked headed for declines for the week, with Brent down nearly 3% and WTI down 2%.
What you should know
The market is continuing to move in both directions as a European Union ban on Russian oil tightens supply and concerns about faltering global demand pushes and pulls.
- Traders looked for some relief from China’s gloomy lockdown. The Chinese government continues to double down on its zero COVID policy, even with lower case counts.
- The U.S. dollar has reached 20-year highs due to inflation and aggressive rate rises, which makes oil more expensive in foreign currencies due to the stronger dollar.
- However, some experts are still concerned about the prospect of a ban on Russian oil by the European Union following sanctions imposed by Russia this week on European units of state-owned Gazprom and the halting of a key gas transit route by Ukraine.
- Additionally, they expect a strengthening oil price as a result of escalating sanctions by Russia.
- “Global oil production growth, combined with a slowdown in global demand for oil, are expected to help offset an acute supply shortage amid worsening Russian supply disruptions,” said an IEA report on Thursday.
According to the agency, Russia’s production could drop by nearly 3 million barrels per day (bpd) from July to September, or about three times more than it is currently displaced, if sanctions for its war with Ukraine are expanded or if further purchases are discouraged.