Oil climbs even as weaker demand concerns cap gains

Friday,   13-May-2022   08:09 AM (IST)

Oil prices firmed in early trade on Friday but were headed for their first weekly losses in three weeks as worries about inflation and China's COVID lockdowns slowing global growth outweighed concerns about dwindling fuel supply from Russia. Brent crude futures were up 97 cents, or 0.9%, at $108.42 a barrel at 0008 GMT, while U.S. West Texas Intermediate (WTI) crude futures climbed $1.00, or 0.9%, to $107.13 a barrel. Both benchmark contracts were, however, on track to post declines for the week, with Brent set to drop more than 3% and WTI more than 2%. The market is continuing to be pushed and pulled by the prospect of a European Union ban on Russian oil sapping supply and concerns about demand being dented by weaker global growth, inflation and China's COVID curbs. Inflation and aggressive rate rises have driven the U.S. dollar to 20-year highs, which has capped oil price gains because the strong dollar makes oil more expensive for buyers holding 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 and after Ukraine stopped a gas transit route.An International Energy Agency report on Thursday highlighted the duelling factors in the market, saying rising oil production in the Middle East and the United States and a slowdown in demand growth are "expected to fend off an acute supply deficit amid a worsening Russian supply disruption". The agency said it saw output from Russia falling by nearly 3 million barrels per day (bpd) from July, or about three times more than is currently displaced, if sanctions for its war on Ukraine are expanded or if they deter further buying.