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Oil Climbs as Dollar Slips, and Supply Fears Keep a lid on Gains

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Oil Climbs as Dollar Slips, and Supply Fears Keep a lid on Gains

(CTN News)  – Despite economic worries and China’s COVID outbreaks, oil prices were held back on Friday as the currency weakened and supply issues persisted.

At 07:40 GMT, Brent oil futures were up $1.84, or 1.9%, to $96.51 a barrel. The contract is expected to increase by more than 0.5% per week.

West Texas Intermediate (WTI) crude for the United States was trading at $90.11 a barrel, up $1.94, or 2.2%, and on pace to post a weekly rise of more than 2%.

As the dollar fell, both contracts increased. A declining dollar makes oil more affordable for consumers using other currencies, which increases demand.

Demand worries weighed on the market, but supply is still anticipated to remain tight due to the impending initiation of European oil embargoes against Russian oil and a decline in U.S. crude stocks.

According to Warren Patterson, director of commodities strategy at ING, “the increasingly bleak economic picture is presenting some significant headwinds to the oil market, and without the production restrictions announced by OPEC+ back in October, we would probably be trading at considerably lower levels.”

The OPEC+ cutbacks have achieved short-term market stability, but this is expected to alter if the EU imposes an embargo on Russian oil starting in February for refined products and next month for crude.

As the world’s largest oil user, worries about a recession in the United States increased on Thursday after Federal Reserve Chairman Jerome Powell said it was “extremely early” to consider stopping interest rate rises.

The threat of more rate increases “diminished chances of a pickup in demand,” according to analysts at ANZ Research.

On Thursday, the Bank of England issued a warning, stating that it believes the UK has entered a recession and that the country’s economy may not develop for another two years.

According to ANZ analysts, people driving fewer miles and Amazon warning of decreased sales are two indicators of poor demand in Europe and the United States, which might reduce the distillation market.

Saudi Arabia reduced its December official selling prices (OSPs) for its flagship Arab Light oil to Asia by 40 cents, bringing the premium above the Oman/Dubai average to $5.45 per barrel, underscoring worries about demand.

The reduction followed trade source predictions, predicated on a deteriorating outlook for Chinese demand.

As the number of cases reached its highest level since August on Thursday, China maintained its severe COVID-19 limits.

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Arsi Mughal is a staff writer at CTN News, delivering insightful and engaging content on a wide range of topics. With a knack for clear and concise writing, he crafts articles that resonate with readers. Arsi's pieces are well-researched, informative, and presented in a straightforward manner, making complex subjects accessible to a broad audience. His writing style strikes the perfect balance between professionalism and casual approachability, ensuring an enjoyable reading experience.

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