Oil prices rose on Friday on expectations that OPEC+ will consider output cuts at a meeting on September 5, though concern over weakness in the global economy and China’s COVID-19 restrictions continue to cap gains.
Brent crude futures jumped 1.9%, or $1.73, at $94.09 a barrel by 1350 GMT, while U.S. West Texas Intermediate (WTI) crude futures rose 2%, or $1.69, to $88.30. Both benchmarks fell 3% to two-week lows in the previous session. Brent was on track for a weekly fall of about 7%, and WTI of nearly 5%.
The Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia – a group known as OPEC+ – are scheduled to meet on Sept. 5 against a backdrop of expected demand falls, though leading producer Saudi Arabia says supply continues to be tight.
Craig Erlam, a senior market analyst at OANDA, stated:
“Oil prices are higher today after falling close to their summer lows over the week. The rebound comes as nuclear talks between Iran and the U.S. appear to have stalled. A deal has been a big downside risk for oil prices recently; something Saudi Arabia sought to counter with warnings of production cuts from the alliance.”
OPEC+ this week amended market balances for 2022 and now expects demands to fall behind supply by 400,000 barrels per day (bpd), against the 900,000 bpd forecast previously. The producer group forecasts a market deficit of 300,000 bpd in its base case for 2023.
G7 finance ministers decided on Friday to enforce a price cap on Russian oil but gave few new details to the plan aimed at restricting revenue for Moscow’s invasion of Ukraine while keeping crude flowing to evade price hikes.
Buy Crypto NowIn the meantime, investors remained concerned about the effect of the most recent COVID-19 curbs in China. The city of Chengdu on Thursday directed a lockdown that has affected manufacturers such as Volvo (VOLVb.ST).
Data showed Chinese factory activity last month dropped for the first time in three months even with slowing demand, while COVID-19 outbreaks and power shortages also hampered output.
