Oil settles up 5% as further interest rate hikes loom

Oil prices settled up by more than 5% on Friday amid uncertainty around future interest rate hikes by the U.S. Federal Reserve, while a looming EU ban on Russian oil and the possibility of China easing some COVID restrictions supported markets, Reuters reported.

Though fears of global recession capped gains, Brent crude futures settled up $3.99 to $98.57 per barrel, a weekly gain of 2.9%.

U.S. West Texas Intermediate (WTI) crude futures were up $2.96, or 5%, at $92.61, a 4.7% weekly gain.

China is sticking to its strict COVID-19 curbs after cases rose on Thursday to their highest since August, but a former Chinese disease control official said substantial changes to the country’s COVID-19 policy are to take place soon.

China’s stock markets have been buoyed this week by the rumours of an end to stringent lockdowns despite the lack of any announced changes.

However, signals about the size of U.S. interest rate hikes caused oil to pare some gains.

The U.S. Labor Department’s non-farm payrolls report on Friday showed a rise in the unemployment rate to 3.7% last month from 3.5% in September, suggesting some loosening in labor market conditions that could give the Fed cover to shift towards smaller rate increases.

While demand concerns weighed on the market, supply is expected to remain tight because of Europe’s planned embargoes on Russian oil and a slide in U.S. crude stockpiles.

The EU ban on Russian crude imports is due to take effect from Dec. 5. Details of G7 price cap aimed at alleviating constraints on Russian flows outside the EU are still under discussion.