Oil prices rise; hopes for Chinese demand outweigh recession concerns

Oil prices rose on Friday as hopes of stronger Chinese demand and a weaker US dollar outweighed concerns about the global economic downturn and the impact of rate hikes on fuel use.

Federal Reserve Bank of Philadelphia President Patrick Harker said on Thursday that the US Federal Reserve is trying to slow the economy to fight inflation and will continue to raise its short-term interest rate target. But crude oil is getting support from the European Union's ban on Russian oil as well as the 2 million barrels a day production cut agreed by the Organization of the Petroleum Exporting Countries, known as OPEC+, and its allies, including Russia. Brent crude traded up $1.12, or 1.2%, at $93.50 a barrel. US West Texas Intermediate crude (WTI) was up 54 cents, or 0.6%, at $85.05 a barrel. Both benchmarks were down more than a dollar during the session. Brent was up 2% on the week, while WTI fell nearly 0.7%. Traders closed positions ahead of the weekend after WTI's November contract expired, adding to volatility. "The trend is to play the weekend on the long side," said John Kilduff, partner at Again Capital LLC in New York. Fluctuations in the US dollar, which typically moves inversely with oil prices, also contributed to choppy trading. [USD/] The dollar depreciated against a basket of currencies even as it prepares for another big rate hike for November, following a report in which some Fed officials said they were more comfortable with large rate hikes to combat inflation. Brent, which neared an all-time high of $147 in March, posted a weekly gain of 0.8%, while US crude headed for a loss of around 1.5%. Both benchmarks had fallen in the previous week. Regarding the OPEC+ cut criticized by the US, Saudi Arabia's Energy Minister said the producer group is doing the right job to ensure stable and sustainable oil markets. On Thursday, oil gained value after Bloomberg News reported that Beijing is considering reducing the quarantine period for visitors from 10 days to seven days. There was no official confirmation from Beijing. "The sudden move in prices gave a useful insight into what can be expected when more punitive restrictions are lifted," Stephen Brennock of oil broker PVM said of the rally in the market following the report. China, the world's largest crude oil importer, has adhered to strict restrictions on COVID-19 this year, putting heavy pressure on trade and economic activity and reducing fuel demand. Meanwhile, energy services firm Baker Hughes Co said the US oil and gas rig count, an early indicator of future production, rose by two to 771 in the week to October 21. [RIG/U] US oil drilling rigs increased by two this week to 612, the highest level since March 2020, while gas drilling rigs remained steady at 157. Follow Global Economic Developments on Social Media! Click here to follow Ieconomy official Facebook account! Click here to follow Ieconomy official Instagram account! Click here to follow Ieconomy official Twitter account!