Oil set for weekly fall as dollar strengthens

Oil prices fell on Friday, heading for a drop of nearly 4% for the week, burdened by the prospect of rate hikes, weaker global growth and Covid-19 lockdowns in China hurting demand, even as the EU weighed a ban on Russian oil.

Brent crude futures slid 81c, or 0.8%, to $107.52 a barrel at 1.30am GMT, while US West Texas Intermediate (WTI) crude futures declined 72c, or 0.7%, to $103.07 a barrel.

Both benchmark contracts were headed for weekly declines of about 3.7%.

This has been the least volatile week of trade since Russia launched its invasion of Ukraine on February 24, sparking sanctions that cut Russian oil supply and led consuming nations to release a record volume of oil from emergency stockpiles. Moscow calls its actions in Ukraine a “special operation”.

Concerns about the Ukraine conflict stoking inflation and denting economic growth dominated trading in the second half of the week, with the International Monetary Fund slashing its global growth forecast by nearly a full percentage point.

China’s central bank governor Yi Gang said on Friday that the world’s second-largest economy was not immune to external shocks, and also faced pressure from Covid outbreaks.

Adding to negative sentiment for oil, comments from US Federal Reserve chair Jerome Powell on Thursday pointing to aggressive rate increases drove up the US dollar, which makes oil more expensive for buyers holding other currencies.

But all of that comes in a tight market, which could face even shorter supply if the EU goes ahead with a ban on Russian oil.

“The worsening situation in Ukraine is increasing pressure on the EU to sanction Russian oil,” ANZ Research analysts said in a note.

Reuters