Oil cartel’s supply cut pushes prices higher

London — Oil rose on Friday and was headed for a second consecutive weekly gain supported by Opec+’s decision to make its largest supply cut since 2020, despite concern about recession and rising interest rates.

The cut from Opec+ comes ahead of a EU embargo on Russian oil and will squeeze supply in an already tight market.

Brent crude was up 33c, or 0.4%, to $94.75 a barrel at 8am GMT. US West Texas Intermediate or WTI crude also gained 33c, or 0.4%, to $88.78.

“Among the key ramifications of Opec’s latest cut is a likely return of $100 oil,” said Stephen Brennock of oil broker PVM. “Gains, however, will be capped by mounting economic headwinds.”

Both benchmarks were heading for a second weekly gain, with that of Brent approaching 8% this week. The global benchmark is still down sharply after coming close to its record high of $147 a barrel in March after Russia invaded Ukraine.

“With Brent now firmly back in the $90-$100 range, the group will likely be pleased with the outcome although substantial uncertainty remains over the economic outlook,” said Craig Erlam of brokerage Oanda, referring to Opec+.

A stronger US dollar ahead of Friday’s US jobs report, and comments from Federal Reserve policymakers signalling further aggressive policy tightening limited the rally.

Dollar strength makes oil more expensive for other currency holders and tends to weigh on oil and other risk assets.

Investors are looking to the US nonfarm payrolls report due later on Friday for clues on how much further US rates need to rise.

US President Joe Biden expressed disappointment on Thursday over Opec+’s plans and he and officials said the US was looking at all possible alternatives to keep prices from rising. 

Reuters