Oil increases over 3% on supply threats

Oil prices increased over 3 percent on Friday supported by real and threatened cuts to supply. Although futures were set for a second weekly decrease as aggressive interest rate hikes and China’s COVID-19 curbs weighed on the demand outlook.

Russian President Vladimir Putin has threatened to cut off oil and gas exports to Europe if price caps are imposed and a small cut to OPEC+ oil output plans announced this week also supported prices.

Brent crude increased $3.30, or 3.7 percent to $92.45 a barrel. U.S. West Texas Intermediate (WTI) crude increased $3.11, or 3.7 percent, to $86.65 a barrel.

“Over the coming months, the West will have to contend with the risk of losing Russian energy supplies and oil prices soaring,” oil broker PVM Stephen Brennock stated.

Pressured by worries about a recession and demand, Brent is decline sharply from a surge in March close to its all-time high of $147 after Russia’s war.

Despite Friday’s bounce, both crude benchmarks were headed for a weekly drop, with Brent declined about 0.6 percent on the week after at one point hitting its lowest since January. WTI was on track for a weekly decrease of 0.3 percent.

If the U.S. Federal Reserve is able to keep the unemployment rate below 5 percent, it can be aggressive on bringing down inflation but after that tradeoffs will appear, Fed Governor Christopher Waller pointed on Friday.