The Business Times

Oil prices settle up; China demand hopes outweigh recession worry

Published Sat, Oct 22, 2022 · 05:45 AM

OIL prices settled up on Friday (Oct 21) as hopes of stronger Chinese demand and a weakening US dollar outweighed concern about a global economic downturn and the impact of interest rate rises on fuel use.

To fight inflation, the US Federal Reserve is trying to slow the economy and will keep raising its short term rate target, Federal Reserve Bank of Philadelphia president Patrick Harker said on Thursday in comments that weighed on oil.

But crude is gaining support from a looming European Union ban on Russian oil, as well as the recent two million-barrels-per-day output cut agreed by the Organization of the Petroleum Exporting Countries and allies including Russia, known as OPEC+.

Brent crude settled at US$93.50 a barrel, up US$1.12, or 1.2 per cent. US West Texas Intermediate crude (WTI) settled at US$85.05 a barrel, up 54 cents, 0.6 per cent. During the session, both benchmarks had been down by more than a dollar.

Brent was up by 2 per cent on the week, while WTI fell about 0.7 per cent.

Traders were squaring up positions ahead of the weekend after the WTI’s November contract expiry, increasing volatility.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

VIEW ALL

“The bias is to play the weekend to the long side,” said John Kilduff, partner at Again Capital LLC in New York.

Swings in the US dollar, which typically moves inversely with oil prices, added to choppy trade.

The dollar eased against a basket of currencies after a report said some Fed officials have signalled greater unease with big interest rate rises to fight inflation, even as they line up another big rate hike for November.

Brent, which came close to its all-time high of US$147 in March, was on track for a weekly gain of 0.8 per cent, while US crude headed for a loss of about 1.5 per cent. Both benchmarks dropped in the previous week.

Regarding the OPEC+ cut, which was criticized by the United States, Saudi Arabia’s energy minister said the producer group was doing the right job to ensure stable and sustainable oil markets.

On Thursday, oil gained after Bloomberg News reported that Beijing was considering cutting the quarantine period for visitors to seven days from 10 days. There has been no official confirmation from Beijing.

“The knee-jerk price action provided a useful glimpse of what to expect once more punitive restrictions are lifted,” said Stephen Brennock of oil broker PVM, of the market’s rally after the report.

China, the world’s largest crude importer, has stuck to strict Covid-19 curbs this year, weighing heavily on business and economic activity and reducing demand for fuel.

Meanwhile, the US oil and gas rig count, an early indicator of future output, rose two to 771 in the week to Oct 21, energy services firm Baker Hughes Co said.

US oil rigs rose two to 612 this week, their highest since March 2020, while gas rigs were unchanged at 157. REUTERS

KEYWORDS IN THIS ARTICLE

READ MORE

BT is now on Telegram!

For daily updates on weekdays and specially selected content for the weekend. Subscribe to  t.me/BizTimes

Energy & Commodities

SUPPORT SOUTH-EAST ASIA'S LEADING FINANCIAL DAILY

Get the latest coverage and full access to all BT premium content.

SUBSCRIBE NOW

Browse corporate subscription here