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Oil rises after correction, on track for weekly loss on recession fears

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SINGAPORE — Oil prices edged up on Friday but were on track for a weekly decline amid fears of sharp interest rate hikes that would dampen global growth and hurt fuel demand.

Brent crude futures rose 24 cents, or 0.3%, to $91.08 a barrel at 0315 GMT, but were down 1.9% for the week so far.

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U.S. West Texas Intermediate (WTI) crude futures gained 10 cents, or 0.1%, to $85.20 a barrel, but were also down 1.9% on a weekly basis.

“Today’s rebound in oil prices can only be described as a short-term correction as the Fed will raise interest rates by 75 bps or 100 bps next week,” analyst Leon Li said. at CMC Markets.

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“While the likelihood of a 100 basis point rate hike is relatively low, it would bring uncertainty to market sentiment. So there is still a risk that oil prices will fall next week.”

Both benchmarks are heading for a third consecutive weekly loss, partly affected by a strong US dollar, which makes oil more expensive for buyers using other currencies. The dollar index fell on Friday but held near last week’s high above 110.

Investors are bracing for a U.S. rate hike next week after data showed a widening in underlying inflation and amid growing worries of a global recession.

The market was also rattled by the International Energy Agency’s outlook for near-zero oil demand growth in the fourth quarter due to a weaker demand outlook for China.

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“Oil fundamentals are still mostly bearish as the outlook for Chinese demand remains a big question mark and the Fed’s inflation fight looks set to weaken the US economy,” the statement said. OANDA analyst Edward Moya in a note.

Analysts said sentiment was hurt by comments from the US Department of Energy that it was unlikely to seek to fill the strategic oil reserve before fiscal 2023.

On the supply side, the market found some support in waning expectations for a return of Iranian crude, with Western officials downplaying prospects of a renewed nuclear deal with Tehran.

Commonwealth Bank analyst Vivek Dhar said this supported the bank’s view that oil markets would tighten by the end of the year and Brent would return to $100 a barrel at the end of the year. fourth trimester.

Oil prices could also be supported in the fourth quarter as OPEC+ members are expected to discuss production cuts at its October meeting, and as Europe faces an energy crisis amid uncertainty over Russia’s oil and gas supply, CMC’s Li added.

(Reporting by Sonali Paul in Melbourne and Emily Chow in Singapore; editing by Richard Pullin)

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