Oil up in choppy trade; U.S. inventories up but Russia cuts supply
Oil prices edged higher in volatile trade on Friday, bolstered by the prospect of lower Russian exports but pressured by rising inventories in the United States and concerns over global economic activity.
Brent crude futures were up 54 cents, or 0.7%, at $82.75 a barrel by 11:31 EST (1631 GMT). West Texas Intermediate U.S. crude futures (WTI) gained 57 cents, or 0.8%, at $75.96. Earlier, both fell by more than $1 a barrel.
Lower trading volumes contributed to the volatility, with Brent trading at 42% and WTI trading at 64% of the previous session’s levels.
The benchmarks were poised to log a second straight week of gains.
On the anniversary of Russia’s invasion of Ukraine, benchmark Brent crude was about 15% lower than a year earlier. It hit a 14-year high of nearly $128 a barrel on Mar. 8, 2022.
Both benchmarks rose about 2% in the previous session on Russia’s plans to cut oil exports from its western ports by up to 25% in March, which exceeded its announced production cuts of 500,000 barrels per day.
But the market appeared to be well supplied with U.S. inventories at their highest since May 2021, according to data from the U.S. Energy Information Administration.
Indications that Russian crude and refined products are accumulating on tankers floating at sea also indicated increasing supplies.
JP Morgan said in a note that it thinks short-term prices are more likely to drift lower toward the $70s than rise “as global growth headwinds strengthen and excess ‘dark’ inventory exacerbated by a flooding of Russian oil is worked off”.
The bank also said it expects the Organization of the Petroleum Exporting Countries (OPEC) to cut production to limit oil price declines.
Oil prices were set for a second straight week of declines after the previous week’s drop of about 4%, weighed also by concerns about rising interest rates that could strengthen the dollar and curb fuel demand.
Minutes of the latest U.S. Federal Reserve meeting indicated that a majority of officials remained hawkish on inflation and tight labour market conditions, signalling further monetary tightening.
The prospect of further interest rate hikes supported the dollar index , which was set for a fourth straight week of gains. The index is now up about 2.5% for the month.
“Price action across the complex this month has sent off a powerful message that rising US interest rates that were further reinforced by Fed minutes, will be a major impediment to sustainable oil price strength,” said Jim Ritterbusch of consultancy Ritterbusch and associates..
A firm dollar makes commodities priced in the greenback more expensive for holders of other currencies.
Source: Reuters (Additional reporting by Ron Bousso, Andrew Hayley and Jeslyn Lerh Editing by Sharon Singleton, Kirsten Donovan, David Goodman and David Gregorio)