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LONDON: Oil steadied on Friday, on course for a weekly gain, as a market outlook tightened by higher Chinese demand and supply cuts by major producers was balanced by an expected weakness in the global economy with the prospect of further interest rate hikes, according to Reuters.
The Bank of England is set to raise interest rates by a quarter of a percentage point next week.
The European Central Bank lifted rates to a 22-year high on Thursday and the US Federal Reserve signaled at least a half of a percentage point increase by year-end.
“OPEC’s (the Organization of the Petroleum Exporting Countries) focus on supply management will likely enforce the view of a soft floor under the market, currently around $72 in Brent, while an upside break seems equally unlikely as long the focus remains on a weakening economic outlook,” said Ole Hansen, head of commodity strategy at Saxo Bank.
Brent crude rose 4 cents to $75.71 a barrel by 1:07 p.m. Saudi time, while US West Texas Intermediate crude also gained 4 cents to $70.66.
Rising interest rates could slow economic growth and reduce oil demand. However, both oil benchmarks were heading for a small weekly gain after declines in the past two weeks.
Oil gained about 3 percent on Thursday on hopes of increasing Chinese demand. China’s refinery throughput rose in May to its second-highest total on record and Kuwait Petroleum Corp’s CEO expects Chinese demand to keep climbing during the second half.
While Chinese demand rises, the voluntary crude output cuts implemented in May by OPEC and its allies, known as OPEC+, together with an additional cut by Saudi Arabia in July, will curb supply.
Oil was also supported by a weaker dollar, which fell to a one-month low against a basket of currencies on Thursday. A weaker dollar makes oil cheaper for buyers with other currencies, which can boost demand.