Oil steadies as potential rate hike offsets demand hopes

Brent crude was up 3 cents to $92.41 a barrel, while U.S. West Texas Intermediate crude was down by 23 cents, or 0.3%, to $84.28

Oil steadied on Friday as investors weighed the impact of sharp interest rate rises on energy consumption, offsetting hopes of higher Chinese demand and output cuts by OPEC and its allies.

To fight inflation, the U.S. Federal Reserve is trying to slow the economy and will keep raising its short-term rate target, Federal Reserve Bank of Philadelphia President Patrick Harker said on Thursday.

Brent crude was up 3 cents to $92.41 a barrel. U.S. West Texas Intermediate crude was down by 23 cents, or 0.3%, to $84.28.

With several key Fed members taking turns at the hawk’s pulpit this week arguing for even higher interest rates, it blunted optimism from China’s reduced quarantine hopes, Stephen Innes, managing director at SPI Asset Management, said in a note.

Everyone is pining for a China-reopening-driven commodity boost, but we are not there yet, Innes said.

Brent, which came close to its all-time high of $147 a barrel in March, is on track for a weekly gain of less than 1%, while U.S. crude was set to fall over 1.5%. Both benchmarks dropped in the previous week.

Oil gained a lift on Thursday after Bloomberg news reported that Beijing was considering cutting the quarantine period for visitors to seven days from 10 days. There has been no official confirmation from Beijing.

The knee-jerk price action provided a useful glimpse of what to expect once more punitive restrictions are lifted, said Stephen Brennock of oil broker PVM, of the market’s rally after the report.

China, the world’s largest crude importer, has stuck to strict COVID-19 curbs this year, weighing heavily on business and economic activity and lowering demand for fuel.