Oil heads for weekly gain after OPEC+ cut despite economy headwinds

LONDON  -Oil rose on Friday and was headed for a second consecutive weekly gain supported by OPEC+’s decision to make its largest supply cut since 2020 despite concern about recession and rising interest rates.

The cut from the Organization of Petroleum Exporting Countries and allies including Russia, known as OPEC+, comes ahead of a European Union embargo on Russian oil and will squeeze supply in an already tight market.

Brent crude was up 33 cents, or 0.4 percent, to $94.75 a barrel at 0800 GMT. U.S. West Texas Intermediate or WTI crude also gained 33 cents, or 0.4%, to $88.78.

“Among the key ramifications of OPEC’s latest cut is a likely return of $100 oil,” said Stephen Brennock of oil broker PVM. “Gains, however, will be capped by mounting economic headwinds.”

Both benchmarks were heading for a second weekly gain, with that of Brent approaching 8 percent this week. The global benchmark is still down sharply after coming close to its all-time high of $147 a barrel in March after Russia invaded Ukraine.

“With Brent now firmly back in the $90-100 range, the group will likely be pleased with the outcome although substantial uncertainty remains over the economic outlook,” said Craig Erlam of brokerage OANDA, referring to OPEC+.

A stronger U.S. dollar ahead of Friday’s U.S. jobs report, and comments from Federal Reserve policymakers signaling further aggressive policy tightening limited the rally.

Dollar strength makes oil more expensive for other currency holders and tends to weigh on oil and other risk assets.

Investors are looking to the U.S. nonfarm payrolls report due later on Friday for clues on how much further U.S. rates need to rise.

U.S. President Joe Biden expressed disappointment on Thursday over OPEC+’s plans and he and officials said the United States was looking at all possible alternatives to keep prices from rising.