LONDON – Oil prices rose on Friday but were headed for their first weekly loss in three weeks as worries about inflation and China’s COVID lockdowns slowing global growth offset concerns about dwindling supplies from Russia.

Oil rises but set for weekly drop as fears of weaker demand limit gains- oil and gas 360

Source: Reuters

Brent crude futures were up $2.32, or 2.2%, at $109.77 a barrel at 1345 GMT, while U.S. West Texas Intermediate (WTI) crude futures climbed $2.52, or 2.4%, to $108.65 a barrel. Both benchmark contracts were, however, on track to post slight declines for the week.

The market is continuing to be pushed and pulled by the prospect of a European Union ban on Russian oil tightening supply and concerns about faltering global demand.

SPI Asset Management managing partner Stephen Innes said in a note that oil traders were looking “for a glimmer of light at the end of China’s gloomy lockdown tunnel”.

“Still, we continuously end up at square one with lower case counts weighted against the authorities doubling down on their zero COVID policy,” he added.

Inflation and rate rises have driven the U.S. dollar to 20-year highs, capping oil price gains as a stronger dollar makes oil more expensive when purchased in other currencies.

Analysts, however, continue to focus on the prospect of a European Union ban on Russian oil, after Moscow imposed sanctions this week on European units of state-owned Gazprom (MCX:GAZP) and after Ukraine halted a key gas transit route.

“Oil prices are rebounding today as the world is in wait-and-see mode over a broad economic downturn and the potential implications of a recession on oil demand,” said Rystad Energy analyst Louise Dickson.

“Extended Covid-19 lockdowns in China, rising cases elsewhere, and fiscal policy decisions to combat soaring inflation are giving the markets reason to be skittish as oil continues its run of over $100/barrel averages.”

An International Energy Agency report on Thursday said rising oil production in the Middle East and the United States and a slowdown in demand growth were “expected to fend off an acute supply deficit amid a worsening Russian supply disruption”.

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