Oil ended a week of trading doldrums by eking out modest gains, with weary investors balancing fears of demand ruination pending bank rate hikes with an anticipated reduction in output from Russia contributing to an increasingly tight global market.
Brent settled up 95 cents at $83.16 per barrel, while West Texas Intermediate settled up 93 cents at $76.32 per barrel; earlier in the session, both benchmarks fell by more than $1 per barrel.
Influencing trading on Friday was JP Morgan, which stated in a note that it thinks short-term prices are more likely to drift lower toward the $70s than rise "as global growth headwinds strengthen and excess 'dark' inventory exacerbated by a flooding of Russian oil is worked off."
Jim Ritterbusch, president of Ritterbusch and Associates, noted that while Russia is helping to stoke a bullish narrative, "price action across the complex this month has sent off a powerful message that rising U.S. interest rates - that were further reinforced by Fed minutes - will be a major impediment to sustainable oil price strength."
Ritterbusch was referring to minutes released from a Jan.31-Feb.1 meeting of policymakers in which they agreed rates would need to move higher to combat inflation, but that the shift to smaller-sized hikes would let them calibrate more closely with incoming data.
Undoubtedly, for every bullish indicator there seems to be a bearish development, and in the U.S. the most obvious one is that crude inventories have grown by almost 24 million barrels in the past two weeks.
Also, Bloomberg on Friday reported that the four-week average of gasoline product supplied – which is a proxy for demand - was at the second-lowest seasonal level since 2014: "The trend is dulling some of the optimism that China's demand will rebound following the end of Covid Zero policies."
Dennis Kissler, senior vice president of trading at BOK Financial Securities, remarked, "Many traders believe inflation is beginning to slow fuel demand in the U.S.; the wild card will be if the slowing effects move into Asia."