Oil stable as OPEC+ quotas offset weak Chinese demand

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Oil prices were flat on Friday as support from a sharp cut to the OPEC+ supply target and a weaker dollar were countered by global recession fears and weak oil demand in China.

Brent crude futures fell 31 cents, or 0.3%, to $94.26 a barrel at 0924 GMT while US West Texas Intermediate (WTI) crude futures fell 25 cents, or 0.3%, to $88.86.

Brent and WTI contracts both hovered between positive and negative territory on Friday, but were down about 4% on the week after two weeks of gains on worries about the global economy.

The US dollar has fallen this week from its recent highs, making dollar-denominated commodities cheaper for holders of other currencies.

China, the world’s biggest crude oil importer, is battling COVID surges after a week-long holiday ahead of a Communist Party congress where President Xi Jinping is expected to expand his leadership.

The country’s infection count is low by global standards, but it adheres to a zero-COVID policy that weighs heavily on economic activity.

The International Energy Agency (IEA) on Thursday lowered its oil demand forecast for this and the next, warning of a possible global recession.

On the bullish side, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, last week announced a 2 million barrel per day (bpd) cut in oil production targets. .

Underproduction within the group means this will likely result in a reduction of 1 million bpd, the IEA estimates.

“The prospect of a decline of around 1 million bpd from next month will significantly reduce the previously expected buildup of extremely low oil inventories over the next few months,” said PVM analyst Stephen Brennock.

Saudi Arabia and the United States, meanwhile, have clashed over the decision.

Oil prices were also supported by a sharp drop in US distillate inventories, although there was a larger than expected increase in US crude oil in storage.
Source: Reuters

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