NEW YORK, Oct 21 (Reuters) – Oil prices settled up on Friday as hopes of stronger Chinese demand and a weakening US dollar outweighed concern about a global economic downturn and the impact of interest rate rises on fuel use.
To fight inflation, the US Federal Reserve is trying to slow the economy and will keep raising its short-term rate target, Federal Reserve Bank of Philadelphia President Patrick Harker said on Thursday in comments that weighed on oil.
But crude is gaining support from a looming European Union ban on Russian oil, as well as the recent 2 million-barrels-per-day output cut agreed by the Organization of the Petroleum Exporting Countries and allies including Russia, known as OPEC+.
Brent crude settled at USD 93.50 a barrel, up USD 1.12, or 1.2%. US West Texas Intermediate crude (WTI) settled atUSD 85.05 a barrel, up 54 cents, 0.6%. During the session, both benchmarks had been down by more than a dollar.
Brent was up by 2% on the week, while WTI fell about 0.7%.
Traders were squaring up positions ahead of the weekend after the WTI’s November contract expiry, increasing volatility.
“The bias is to play the weekend to the long side,” said John Kilduff, partner at Again Capital LLC in New York.
Swings in the US dollar, which typically moves inversely with oil prices, added to choppy trade.
The dollar eased against a basket of currencies after a report said some Fed officials have signalled greater unease with big interest rate rises to fight inflation, even as they line up another big rate hike for November.
Brent, which came close to its all-time high of USD 147 in March, was on track for a weekly gain of 0.8%, while US crude headed for a loss of about 1.5%. Both benchmarks dropped in the previous week.
Regarding the OPEC+ cut, which was criticized by the United States, Saudi Arabia’s energy minister said the producer group was doing the right job to ensure stable and sustainable oil markets.
On Thursday, oil gained after Bloomberg News reported that Beijing was considering cutting the quarantine period for visitors to seven days from 10 days. There has been no official confirmation from Beijing.
“The knee-jerk price action provided a useful glimpse of what to expect once more punitive restrictions are lifted,” said Stephen Brennock of oil broker PVM, of the market’s rally after the report.
China, the world’s largest crude importer, has stuck to strict COVID-19 curbs this year, weighing heavily on business and economic activity and reducing demand for fuel.
Meanwhile, the US oil and gas rig count, an early indicator of future output, rose two to 771 in the week to Oct. 21, energy services firm Baker Hughes Co. (BKR) said.
US oil rigs rose two to 612 this week, their highest since March 2020, while gas rigs were unchanged at 157.
(Additional reporting by Alex Lawler, Florence Tan and Emily Chow in Singapore; Editing by Marguerita Choy, Susan Fenton and David Gregorio)
This article originally appeared on reuters.com