Oil prices rebalanced on Friday after an early $1 rally as a stronger dollar and weaker economic outlook weighed while hopes of a Chinese demand boost limited losses.
U.S. West Texas Intermediate crude futures rose $1, or 1.35%, at $74.82.
Brent crude futures rose $1.15, or 1.46%, to $79.95 a barrel.
Both contracts rose by more than $1 earlier in Friday’s session but fell as the dollar rose to a one-month high.
A stronger dollar can crimp demand for oil as dollar-denominated commodities become more expensive for holders of other currencies.
The rally came after U.S. economic data highlighted a still-tight labour market that could prompt the U.S. Federal Reserve to keep raising interest rates aggressively.
Markets now turn their attention to the closely watched U.S. payrolls report due later on Friday.
“The jobs number will have a major influence, given that it could provide clues as to whether or not the Federal Reserve still plans on slowing down the economy,” said PVM’s Brennock.
Some price support followed news that China, the world’s largest crude oil importer, expects passenger traffic by road, rail, water and air during the coming Lunar New Year holidays to double from the same period in 2022.
China, the economy of which has been hit by another COVID wave, also announced more state support measures on Thursday.
Further bullish sentiment came from a higher-than-expected fall in U.S. distillate inventories in the week to Dec. 30, according to data from the Energy Information Administration (EIA) on Thursday.
On a weekly basis, both the Brent and WTI contracts were on track to fall by almost 9% from the previous week, pressured by concern over the possibility of a global recession.
“The oil market might be regaining some composure following the bloodbath earlier this week, but the upside potential remains limited, at least in the near term. The economic outlook is clouded,” said PVM analyst Stephen Brennock.
The world’s top crude exporter, Saudi Arabia, lowered prices for the Arab light crude it sells to Asia to its lowest since November 2021 amid the global pressures hitting oil.
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