Oil prices rise on signs of improved demand and potential OPEC+ cuts, up 3% over the week
Oil rose as high as $1 on Friday on signs of recovery in fuel demand, but gains stayed limited as the market awaited hints of a rate hike in the US Federal Reserve's speech later in the day.
Brent crude futures rose 99 cents, or 1%, to $100.33 a barrel, while West Texas Intermediate (WTI) crude futures rose 98 cents, or 1.1%, to $93.50 a barrel. Both contracts rose as much as $1 in early trading after dropping by nearly $2 on Thursday.
Despite uncertainty over the pace of rate hikes to combat rising inflation in the United States, oil demand concerns eased this week, putting benchmark oil contracts on the way to post gains of around 3% for this week.
Comments from some U.S. central bank officials ahead of Chair Jerome Powell's speech on Friday had cast a cloud over the economic backdrop.
Still, there are strong demand signs. The latest Congestion Index data from TomTom shows traffic levels in the Asia Pacific, Europe, and North America all posting strong weekly growth for the week through August 24. Congestion levels in China have also rebounded.
The possibility of the Organization of the Petroleum Exporting Countries (OPEC) to cut production to balance the production increases from Iran also supported the prices.
The potential OPEC+ production cuts discussed by Saudi Arabia this week could coincide with Iran's return to oil markets if it signs a nuclear deal with the West, sources said.
The supply cartel's signal that it will cut production if oil prices weaken will continue to support the crude oil markets.
Tehran is reviewing Washington's response to the final proposal to revive the nuclear deal, which the EU has prepared and expects an imminent response to. However, it is unclear how fast Iranian oil exports will resume if a deal is reached.
If sanctions against Iran are lifted, it could take about a year and a half to reach its full capacity of 4 million bpd, an increase of 1.4 million bpd compared to its current production.
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