Oil Market Rises Amid Economy, Demand Woes

By Adedapo Adesanya

The oil market rose on Friday but fell for the third straight week after a sharp decline earlier this week ahead of benchmark interest rate rises and on concern that the US banking crisis will slow the economy and affect fuel demand.

Yesterday, Brent crude improved its value by $2.80 or 3.9 per cent to $75.30 a barrel, as the US West Texas Intermediate (WTI) went up by $2.78 or 4.1 per cent to trade at $71.34 per barrel.

The Brent benchmark finished the week with a decline of about 5.3 per cent, while WTI plunged 7.1 per cent, even after the rebound on Friday.

The US Federal Reserve raised interest rates by a quarter of a percentage point, pressuring oil prices as traders worried that slower economic growth could hit energy demand.

The US central bank also signalled that it might pause further interest rate increases to give the American government time to assess the fallout from recent bank failures and to gain clarity on the dispute over raising the US debt ceiling.

The European Central Bank (ECB), on its end, eased the pace of its interest rate hikes and kept its options open on future moves as it fights stubbornly high euro zone inflation.

The 25 basis point increase to the ECB’s three policy rates was the smallest since it started lifting them last year.

A better-than-expected jobs report in the US helped ease some fears of an imminent economic downturn, spurred in part by renewed banking fears.

In China, however, factory activity contracted unexpectedly in April as orders fell and poor domestic demand dragged on the sprawling manufacturing sector.

Meanwhile, expectations of potential supply cuts at the next meeting of the Organisation of the Petroleum Exporting Countries (OPEC)and allies, OPEC+ in June have provided some price support.

The group started cutting over 1 million barrels this month.

Deputy Prime Minister Alexander Novak said on Thursday Russia was abiding by its voluntary pledge to cut oil output by 500,000 barrels per day from February until the end of the year.

The oil rig count in the US, an indicator of future output, fell by 3 to 588 this week, data from oil services firm Baker Hughes showed.