As diesel inventories decreased and oil prices reversed previous losses, they gradually increased in Asian trade on Friday. Saudi Arabia and Washington, however, continued to disagree over OPEC+’s intentions to reduce output. By 0242 GMT, Brent crude futures had increased by 29 cents, or 0.3%, to $94.86 per barrel, while U.S. West Texas Intermediate (WTI) crude futures had increased by 31 cents, or 0.35%, to $89.42 per barrel. However, both contracts experienced a weekly loss of around 3% following two weeks of gains due to recession worries.
According to Tina Teng, an analyst at CMC Markets, “the softened U.S. dollar and the strong rebound in risk assets lifted oil prices, the rebounding momentum may continue into today’s Asian session.” A weaker dollar typically makes dollar-denominated commodities like oil less expensive for holders of other currencies.
Teng continued, “OPEC+’s output cut will continue to validate oil prices, along with a potential recovery in China’s demand in the fourth quarter if Beijing relaxes COVID limitations. China, the world’s largest crude oil importer, has been fighting a COVID rebound after its week-long National Day holiday earlier this month and just ahead of a key Communist Party Congress where President Xi Jinping is expected to extend his leadership. The country’s infection tally is small by global standards, but it adheres to a zero-COVID policy.
Meanwhile, Saudi Arabia and the United States continued to clash over a decision by the Organization of Petroleum Exporting Countries and allies, known as OPEC+, last week to cut its oil production target. Saudi Arabia, OPEC’s de facto leader, rejected criticisms by Washington as “not based on facts” and that the U.S. request to delay the cut by a month would have had negative economic consequences.
The White House said it presented the Saudis with an analysis that showed the reductions could hurt the global economy and alleged the Saudis pressured other OPEC members on a vote. Officials with both countries are expected to continue discussions soon. Oil prices were also supported by a steep drawdown in distillate stocks that came as heating oil demand is expected to rise as winter approaches.