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LONDON: Oil prices rose on Friday but were poised for a third straight week of losses after markets registered dramatic drops on fears of a weakening US economy and slowing Chinese demand, according to Reuters.
Brent crude rose $1.88, or 2.6 percent, to $74.38 a barrel by 11:28 a.m. GMT. US West Texas Intermediate was up $1.89, or 2.8 percent, at $70.45 after four days of declines that sent the contract to lows last seen in late 2021.
The Brent benchmark was on track to finish the week with a decline of about 6.5 percent, while WTI was set for a 8 percent loss, despite heading for their biggest daily percentages rises in a month.
“Rather than underlying fundamentals, the selling frenzy over the past week has been driven by worries about demand linked to recession risks and the strain in the US banking sector,” said PVM oil market analyst Stephen Brennock.
“The upshot is that there is a big disconnect between oil balances and oil prices. These dislocations tend to be temporary and normal order should soon be restored.”
Commerzbank analysts also said oil demand concerns were overblown and expect a price correction upward in coming weeks.
The dollar weakening against other currencies this week helps support oil, making it cheaper for holders of other currencies.
Worries over a US regional banking crisis persisted after PacWest Bancorp said it planned to explore strategic options.
In China, factory activity contracted unexpectedly in April as orders fell and poor domestic demand dragged on the sprawling manufacturing sector.
Service activity in China grew through April, though the rate of this expansion has slowed, data showed on Friday.
However, expectations of potential supply cuts at the next meeting of the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, in June have provided some price support, said Kelvin Wong, a senior market analyst at OANDA in Singapore.
Traders are focused on the release of US employment data at 12:30 p.m. GMT and comments on monetary policy from St. Louis Fed President James Bullard and Minneapolis Fed President Neel Kashkari at the Economic Club of Minnesota.
Investors now broadly expect the Fed to pause rate hikes at its June policy meeting.