Oil supported by supply threats yet still set for a second weekly drop

Friday’s oil price rise was supported by supply cuts and real threats. However, crude saw the second week of declines as China’s COVID-19 curbs and aggressive interest rate increases weighed on its demand outlook.

  • Oil benchmarks forecast a more than 2% weekly drop
  • Putin threatens to shut off all energy supplies
  • Extended COVID lockdown imposed on millions in Chengdu, China

Russian President Vladimir Putin threatened to halt oil exports to Europe if a price cap is imposed. A small reduction to OPEC+ oil production plans announced this week also supported prices.

Brent crude oil rose $1.24, or 1.4% to $90.92 per barrel by 10:11 BST. U.S. West Texas Intermediate crude (WTI), rose $1.05, or 1.3% to $85.12.

Stephen Brennock, an oil broker at PVM, stated that the West would have to deal with the possibility of Russian energy supplies being cut off and oil prices rising in the months ahead.

Brent fell sharply after a March surge to $147, close to its record high of $147. This was due to fears about recession and low demand.

Despite Friday’s rebound, both crude benchmarks were heading for a weekly decline of more than 2% with Brent this week reaching its lowest level since January.

Tina Teng, a CMC Markets analyst, said that the sell-off of oil prices could be halted for now because of a recovery in risk perception across the board. She also stated that a weaker dollar has supported a rebound in risk assets.

Although supply tightness is supportive of the market, the unprecedented rate rise by the European Central Bank at 75 basis points this Week and additional COVID-19 lockdowns for China have had an impact on the market.

On Thursday, Chengdu locked down most of its 21 million residents. Millions more were warned to avoid travel during the upcoming holidays

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