Oil prices rose as much as $1 on Friday on signs of improving fuel demand, although further gains were capped as the market awaited clues from the US Federal Reserve chairman on the outlook for rate hikes in a speech later in the day.
Brent crude futures climbed 99cents, or 1 per cent, to $100.33 a barrel by 0620 GMT, while US West Texas Intermediate (WTI) crude futures rose 98 cents, or 1.1 per cent, to $93.50. Both contracts jumped in early trade by as much as $1 after slumping about $2 on Thursday.
Despite uncertainty over the pace of rate hikes in the United States to tackle soaring inflation, worries about oil demand destruction eased this week, putting the benchmark oil contracts on track for gains of around 3 per cent for the week.
ANZ Research analysts said comments from some US central bank officials ahead of Chair Jerome Powell’s speech on Friday had cast a cloud over the economic backdrop.
“Nevertheless, signs of strong demand are emerging,” ANZ Research analysts said in a note, pointing to data on encouraging road traffic growth.
“The most recent Congestion Index data from TomTom shows Asia Pacific, European and North American traffic levels all posting strong weekly growth in the week to August 24.”
Congestion levels in China also rebounded, ANZ said, pointing to Baidu data.
The prospect of the Organization of the Petroleum Exporting Countries (OPEC) curbing output to offset production increases from Iran also supported prices.
Sources told Reuters that potential OPEC+ production cuts mooted this week by Saudi Arabia are likely to coincide with the return of Iran to oil markets should it clinch a nuclear deal with the West.
Crude markets may remain supported, said Tina Teng, an analyst at CMC Markets, as the supply cartel signalled it would cut output if oil prices weaken.
Tehran is reviewing Washington’s response to a European Union-drafted final offer to revive a nuclear deal, with the EU expecting a response soon. It is unclear, though, how quickly Iranian oil exports would resume if a deal is reached.
If sanctions are lifted against Iran, it could take around a year and a half for it to reach its full capacity of 4 million barrels per day, up 1.4 million bpd from its current output.