London — Oil prices were down slightly on Friday but set to rise on the week as recession fears eased though an uncertain demand outlook capped gains.
Brent crude futures were down 9c, or 0.1%, to $99.51 a barrel at 9am GMT, while US West Texas Intermediate (WTI) crude futures fell 38c or 0.4% to $93.96 a barrel.
Brent was on track to rise more than 3% this week after last week’s 14% tumble, its biggest weekly decline since April 2020 amid the fear that rising inflation and interest rate hikes will hit economic growth and demand for fuel.
Uncertainty capped price gains as the market absorbed contrasting demand views from oil cartel Opec and the International Energy Agency (IEA).
“While the peaking-inflation narrative has given some traction for risk assets lately, the more measured moves in oil prices since June suggest that some reservations remain in light of its cloudy demand outlook,” said Yeap Jun Rong, a market strategist at IG.
The trade-off for growth may continue to limit oil prices’ upside, with key psychological resistance for Brent at the $100 a barrel level, Yeap said.
On Thursday, Opec cut its forecast for growth in world oil demand in 2022 by 260,000 barrels a day (bbl/day). It now expects demand to rise by 3.1-million barrels a day in 2022.
In contrast, the IEA raised its demand growth forecast to 2.1-million barrels a day citing gas-to-oil switching in power generation.
“There’s a great deal of uncertainty about demand in the short run. Until that settles, it [the market] will be like this for a while,” said Justin Smirk, a senior economist at Westpac.
The IEA also raised its outlook for Russian oil supply by 500,000bbl/day for the second half of 2022, but said Opec would struggle to boost production.
“The oil market has bounced back this week, with Brent once more flirting with triple figures,” said Craig Erlam, senior market analyst at Oanda in London.
“All things considered, the price moves highlight just how tight the market remains and how sensitive it therefore still is to spikes.”