– Brent and WTI contracts on track for weekly decline
– Distillates drawn down, U.S. crude stockpiles surge
– OPEC+ output target will keep inventories low, says analyst
London — Oil prices were stable on Friday as support from a large cut to the OPEC+ supply target and a weaker dollar were countered by global recession fears and weak oil demand in China.
Brent crude futures were down 31 cents, or 0.3%, at $94.26 a barrel at 0924 GMT while U.S. West Texas Intermediate (WTI) crude futures fell 25 cents, or 0.3%, to $88.86.
The Brent and WTI contracts both oscillated between positive and negative territority on Friday but were down about 4% over the week after two weeks of gains on concern over the global economy.
The U.S. dollar this week dropped from recent highs, making dollar-denominated commodities cheaper for holders of other currencies.
China, the world’s largest crude oil importer, has been fighting COVID flare-ups after a week-long holiday ahead of a Communist Party Congress where President Xi Jinping is expected to extend his leadership.
The country’s infection tally is small by global standards, but it adheres to a zero-COVID policy that is weighing heavily on economic activity.
The International Energy Agency (IEA) on Thursday cut its oil demand forecast for this and next, warning of a potential global recession.
On the bullish side, the Organization of the Petroleum Exporting Countries (OPEC) and allies, together known as OPEC+, last week announced a 2 million barrel per day (bpd) cut to oil production targets.
Underproduction among the group means this will probably translate to a 1 million bpd cut, the IEA estimates.
“The prospect of a decrease of around 1 million bpd from next month onwards will sharply reduce a previously expected build in critically low oil inventories over the coming months,” said PVM analyst Stephen Brennock.
Saudi Arabia and the United States, meanwhile, have clashed over the decision.
Oil prices were also supported by a steep drawdown in U.S. distillate stocks (USOILD=ECI), though there has been a larger than expected surge in U.S. crude oil in storage.
*Shadia Nasralla, Emily Chow, Editing: David Goodman – Reuters
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