Oil prices rose on Friday after the International Energy Agency said Saudi Arabia and the UAE could help alleviate tight crude markets by increasing output.
Both the main oil grades were still headed for their first weekly losses in seven amid concern that accelerating inflation will lead to higher interest rates, slowing the economy.
Brent crude climbed 1.4 percent to $92.69 a barrel at 3:42 p.m. Riyadh time, while US benchmark WTI added 1.6 percent to $91.29.
Brent closed at $93.27 last Friday, while WTI ended the week at $92.31, both near seven-year highs.
The Organisation of the Petroleum Exporting Countries and its allies, known as OPEC+, pumped 900,000 barrel per day below its target in January, a shortfall that could be made up by Saudi Arabia and the UAE, which have the most spare capacity, the IEA said on Friday.
Oil prices gained on Wednesday as weekly data showed US crude inventories dropped by nearly 5 million barrels and fuel demand rose to a record. Global oil demand could rise even more steeply than forecast this year amid a strong post-pandemic economic recovery, OPEC said in a report yesterday.
Prices have also been pushed up by continuing geopolitical tension in Eastern Europe where Russia has amassed more than 100,000 troops on its border with Ukraine.
Oil will “certainly” hit $120 a barrel and the global economy will be “radically altered” if Russia invades Ukraine, veteran oil strategist David Roche told CNBC on Wednesday.
However, the possibility of aggressive action from the Federal Reserve in response to soaring inflation tempered oil price gains. The US yesterday reported annual inflation of 7.5 percent, the highest in 40 years.
St. Louis Federal Reserve Bank President James Bullard said yesterday he wants a full percentage point of interest rate hikes by July 1. The Fed’s next rates decision is on March 16.
“Yesterday’s inflation number likely puts more pressure on the US Fed to act more aggressively with rate hikes. This expectation is weighing on oil and the broader commodities complex somewhat,” said Warren Patterson, ING’s head of commodities research.
Price gains were also curbed by the resumption of indirect talks between the US and Iran after a 10-day break to revive a nuclear deal. If agreed, a deal could see the lifting of sanctions on Iranian oil exports.