Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Oil Rises as Russian Price Cap Looms, But Weekly Losses on Tap

Published 04/11/2022, 01:28 pm
Updated 04/11/2022, 01:28 pm
© Reuters.

© Reuters.

By Ambar Warrick 

Investing.com-- Oil prices rose on Friday as markets awaited the passing of a price cap on Russian exports, although concerns over Chinese demand and a hawkish Federal Reserve put crude on course to end the week lower. 

Reuters reported that the Group of Seven (G7) rich countries agreed to set a fixed price when curbs on Russian oil exports kick in later this month. The passing of the price caps is expected to eventually tighten crude supplies, given that Russia warned it will stop supplying oil to any countries that agree to the curbs. 

Brent oil futures rose 0.6% to $94.18 a barrel in early Asian trade, while West Texas Intermediate crude futures, the U.S. benchmark, rose 0.6% to $88.69 a barrel. But Brent was set to lose around 1% this week, while WTI futures were set to close the week flat.

The Russian oil price caps are intended to dent Moscow's oil revenues in response to the country’s invasion of Ukraine. But markets are doubtful over the effectiveness of the curbs, given that major Russian importers China and India have given little indication they will comply. 

The curbs will also effectively cut off any Russian fuel exports to the west, which is expected to severely curb supplies in the coming months. 

Oil prices started the week on strong footing amid rumors that China was planning to scale back its strict zero-COVID policy. But prices reversed most of their gains after Beijing dismissed the rumor. 

The zero-COVID policy is at the heart of China’s economic slowdown this year, and has severely crimped crude demand in the country. 

Crude prices were also dented by strength in the dollar, after the Federal Reserve hiked interest rates and presented a more hawkish stance than markets were expecting. The move ramped up concerns that the Fed is willing to risk a U.S. recession in its fight against inflation- a scenario that is negative for crude demand. 

Oil prices fell sharply this year amid growing concerns that high inflation and rising interest rates will slow global economic growth, weighing on crude demand.

But data released this week showed a much bigger drawdown in weekly U.S. inventories than expected, signaling that crude demand in the world’s largest economy remained steady. 

The OPEC, which announced a two million barrel per day supply cut in October, flagged stronger crude demand in the medium to long term. The cartel also assured investors this week that it stands ready to help stabilize oil prices. 

 

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.