MELBOURNE — Oil prices rose in early trade on Friday on signs of improving fuel demand, though gains were capped as the market awaited clues from the U.S. Federal Reserve chairman on the outlook for rate hikes in a speech later in the day.
Brent crude futures climbed 46 cents, or 0.5%, to $99.80 a barrel at 0051 GMT. U.S. West Texas Intermediate (WTI) crude futures also rose 48 cents, or 0.5%, to $93.00 a barrel. Both slumped about $2 on Thursday.
Despite uncertainty over the pace of rate hikes in the United States to tackle soaring inflation, worries about oil demand destruction eased this week, putting both benchmark oil contracts on track for gains of around 3% for the week.
ANZ Research analysts said comments from some U.S. central bank officials ahead of Chairman Jerome Powell’s speech on Friday had cast a cloud over the economic backdrop.
“Nevertheless, signs of strong demand are emerging,” ANZ Research analysts said in a note, pointing to data on encouraging traffic growth.
“The most recent Congestion Index data from TomTom shows Asia Pacific, European and North American traffic levels all posting strong weekly growth in the week to August 24.”
Congestion levels in China also rebounded, ANZ said, pointing to Baidu data.
Along with caution in the market ahead of Powell’s speech, the prospect of Iranian crude returning to global markets also kept a lid on price gains.
Tehran is reviewing Washington’s response to a European Union-drafted final offer to revive a nuclear deal, with the EU expecting a response soon, though it is unclear how quickly Iranian oil exports would resume even if a deal is reached.
If sanctions are lifted against Iran, it would need around a year and a half to reach its full capacity of 4 million barrels per day, up 1.4 million bpd from its current output.
However, the Organization of Petroleum Exporting Countries (OPEC) would consider curbing output to offset any increase from Iran, OPEC sources said this week, after Saudi Arabia flagged the possibility of introducing cuts. (Reporting by Sonali Paul in Melbourne; Editing by Himani Sarkar)