Oil prices gained about $1 in early trade on Friday, lifted by supply concerns and a weaker U.S. dollar as attention turns to what OPEC and allies including Russia agree at a meeting next week marking the end of their 2020 output reduction pact.
U.S. West Texas Intermediate (WTI) crude CLc1 futures for September delivery rose $1.09, or 1.1 per cent, to $97.51 a barrel by 0041 GMT, reversing losses from the previous session when sentiment was hit by fears of a recession in the United States.
Brent crude LCOc1 futures for September settlement, due to expire on Friday, rose 86 cents, or 0.8 per cent, to $108.00 a barrel. The more active October contract LCOc2 climbed 87 cents, or 0.9 per cent, to $102.70.
Brent is on course to climb nearly 5 per cent for the week in its second straight weekly gain, while WTI is on track for a nearly 3 per cent rise for the week, recouping the previous week's losses.
"Oil prices have little chance of (posting) deep losses on the back of a weak U.S. dollar and the ongoing supply crunch," said CMC Markets analyst Tina Teng.
Oil typically rises when the dollar falls as a weaker dollar makes crude cheaper for buyers holding other currencies.
The next meeting of the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, together called OPEC+, on Aug. 3 will be key as the producers have now unwound the record 9.7 million barrels per day (bpd) supply cut they agreed in April 2020, when the COVID-19 pandemic slammed demand.
OPEC+ sources said the group will consider keeping oil output unchanged for September, but two OPEC+ sources also told Reuters a modest increase would be discussed. Read full story
A decision not to raise output would disappoint the United States after U.S. President Joe Biden visited Saudi Arabia this month hoping to strike a deal on oil production.
A senior U.S. administration official said on Thursday the government was optimistic about the OPEC+ meeting, and said extra supply would help stabilise the market.
Analysts, however, said it would be difficult for OPEC+ to boost supply much given that many producers are struggling to meet their production quotas due to a lack of investment in oil fields.
"OPEC production is constrained, though supplies are stabilising in Libya and Ecuador. Under-investment in many member countries will keep production constrained," ANZ Research analysts said.
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