Doha: Oil prices settled up by more than $3 a barrel on Friday, supported by tight supply, but they notched their second weekly decline on concerns that rising interest rates could push the world economy into recession.
Brent crude settled up 2.8% on Friday’s session, at $113.12 a barrel, while U.S. West Texas Intermediate (WTI) crude closed up 3.2%, at $107.62. Both benchmarks were down slightly on the week as investors worried that rate hikes by the Federal Reserve could push the U.S. economy into recession, dampening demand for fuel.
On Thursday, Fed Chair Jerome Powell said the central bank’s focus on curbing inflation was “unconditional”, adding to fears of additional interest rate hikes. Russia’s invasion of Ukraine continues to exacerbate tight supplies, just as demand has been recovering from the COVID-19 pandemic. Crude has gained support from the almost total shutdown of output in OPEC member Libya due to unrest. The Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, meet on June 30 and are expected to stick to a plan to only slightly accelerate hikes in oil production in July and August.
Asian spot LNG continued its upward trend last week as fears of further market tightening following a major outage at a Freeport plant and reduced Russian gas flows to Europe pushed buyers to cover short-term needs.
The average LNG price for August delivery into north-east Asia was estimated at $37 per million British thermal units (mmBtu), up 1.4% from the previous week. In the U.S, natural gas futures held near an 11-week low on Friday as forecasts for hotter weather, higher demand and less output than last month offset a drop in LNG exports, also due to the extended shutdown of the Freeport LNG export plant in Texas.
The shutdown on June 8 reduced the amount of US gas available to the rest of the world, especially Europe, where most US LNG has gone as countries there wean themselves off Russian energy. In further restriction to supply, Gazprom has reduced the capacity of the Nord Stream 1 pipeline that runs under the Baltic Sea from Russia to Germany by 60%, citing equipment problems.
