Investing.com -- Oil prices steadied on Friday, but were set for their worst weekly drop in nearly two months amid fears of slowing U.S. economic growth and a softer-than-expected rebound in Chinese demand.
Concerns that a U.S. banking crisis could further stymie economic growth also weighed, with crude logging steep losses following the collapse of yet another U.S. bank this week.
Brent oil futures rose 0.1% to $72.58 a barrel, while West Texas Intermediate crude futures rose 0.1% to $68.67 a barrel by 20:52 ET (00:52 GMT). Both contracts were set to lose between 8% and 11% this week, and were set for a third straight week of declines.
Oil prices saw some support over the past session, amid supply concerns stemming from Iran and Russia. Weakness in the dollar, amid growing expectations for a Federal Reserve rate pause, also stemmed a bigger rout in crude markets.
But persistent concerns over a recession limited any upside in oil prices, which were trading close to their lowest levels since December 2021.
Data released earlier in the week showed that Chinese manufacturing activity unexpectedly contracted in April, pointing to an uneven economic recovery in the country as it recovers from three years of COVID ructions.
The data saw traders question whether crude demand in China will rebound as expected this year, which was a key point of support for oil bulls.
The U.S. Federal Reserve also warned of a mild recession this year, as it hiked interest rates and flagged a more data-driven approach to future hikes.
But with U.S. economic growth having severely cooled this year, coupled with an ongoing crisis in the banking sector, markets doubted whether the central bank had enough headroom to raise interest rates further.
Focus is now on U.S. nonfarm payrolls data due later in the day, which is largely expected to factor into the Fed’s future rate decisions. While the data is expected to show some cooling in the labor market through April, any surprises to the upside could see market reassess bets on a Fed pause.
Oil prices are trading substantially lower for the year, having largely reversed recent gains as a surprise production by the Organization of Petroleum Exporting Countries (OPEC) provided a limited boost to markets.
Markets fear that worsening economic conditions - amid high interest rates and relatively high inflation - could stymie crude demand this year.