Crude oil prices increased Friday, buoyed by a weaker U.S. dollar, but remain on track for their lowest weekly finish in seven months due to fears about sluggish economic growth and China’s COVID difficulties, which are dragging on global demand. U.S. RBOB gasoline futures were down 2.3% at $2.4006 a gallon.

The U.S. dollar fell dramatically on Friday, reversing a month-long gain after failing to achieve fresh highs in reaction to Federal Reserve Chair Jerome Powell’s hawkish comments on Thursday. Because the Crude oil market, like the markets for many other commodities, is denominated in dollars, this weakening has relieved pressure on non-dollar-based importers all over the world.


Nonetheless, crude oil was headed for a second weekly drop as aggressive interest rate hikes and China’s COVID-19 limitations weighed on demand.

China, the world’s top crude oil importer, put new limits on internal travel this week as it battles stubborn breakouts of the virus. Before next week’s Golden Week vacation, Beijing is increasing travel restrictions for everyone entering or departing the capital, while Chengdu, the country’s sixth-largest metropolis with 21 million people, stays closed. According to the consultancy Energy Aspects, Chinese Crude oil consumption could fall by 380,000 barrels per day this year for the first time since 2002.

This comes only a day after the European Central Bank raised interest rates by a whopping 75 basis points and with the Federal Reserve anticipated to do the same in a matter of weeks – steps that are likely to harm economic growth and, consequently, Crude oil consumption in the future. Another negative was the Energy Information Administration’s data on Thursday, which showed a substantial building of U.S. Crude oil stocks of 8.8 million barrels last week, raising concerns about the strength of demand from the world’s top consumer.

European Union Meeting

However, the government’s release of crude oil stockpiles from the country’s Strategic Petroleum Reserve is likely to have overstated this build. A meeting of European Union energy ministers is also of interest, as they strive to come up with ways to bring down cripplingly high power and natural gas prices ahead of the coming winter.

Members of the Organization of the Petroleum Exporting Countries and their allies, known as OPEC+, may also make comments after their decision to cut output by 100,000 barrels per day last week had little influence on the market. The current drop in Crude oil prices raises the possibility of OPEC+ action, analysts wrote in a note. The group made it plain that if they felt it was necessary, they would take additional action, and the market is likely trading around levels where they are beginning to feel uneasy.

Baker Hughes rig count and CFTC positioning data wrap off the week.

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