Crude Oil Closes 2% Higher Amid Worries

By Adedapo Adesanya

Crude oil rose 2 per cent on Friday amid pressure that investors worried about a potential recession-driven demand downturn even as global fuel supplies remained tight.

Brent crude futures gained $2.37 or 2.3 per cent to settle at $107.02 per barrel while the United States West Texas Intermediate (WTI) crude rose $2.06 or 2.01 per cent to settle at $104.79 a barrel.

Despite this, the market was still headed for a weekly decline as Brent posted a weekly decline of about 4.1 per cent and WTI a loss of 3.4 per cent following on from the first monthly decline since November 2021.

Mass COVID-19 testing in Shanghai this week caused worries about potential lockdowns that could also hit oil demand.

Lockdowns and repeated mass testing in China, part of its zero-COVID policy that aims to eradicate all outbreaks, have brought case numbers down but many of the measures have taken a toll on the economy as restricted movement clamped down on demand.

Strength came from the US as non-farm payroll data showed the economy added more jobs than expected in June, although market analysts note that it is a sign that gives the US Federal Reserve ammunition to deliver another 75-basis-point rate hike this month.

Central banks around the world are raising interest rates to tame inflation, spurring fears that rising borrowing costs could stifle growth.

Bans on Russian oil exports have supported prices and sparked a re-routing of flows while the Organisation of the Petroleum Exporting Countries (OPEC) and allied producers, OPEC+ struggle to deliver on pledged production increases.

OPEC+ pumped more than 2.5 million barrels per day below its target in June, despite a rebound in Russia’s oil production that helped the group’s output rise by 730,000 barrels per day from May, according to the Argus survey published on Friday.

Saudi Arabia and Iraq, OPEC’s largest and second-largest producers, raised their output as domestic demand from power plants that burn oil increased seasonally. Russia, the largest non-OPEC producer part of the OPEC+ pact, saw its production rebound last month and rise by 550,000 barrels per day compared to May.

Nigeria continued to experience severe production problems. Its output slumped to a 17-month low in June as shipments of the Forcados and Qua Iboe crudes fell, per the Argus survey.