By Ambar Warrick
Investing.com -- Oil prices rose slightly in early Asian trade on Friday as signs of increasing demand in China helped markets look past an OPEC warning on potential headwinds, while tightening supply and a weaker dollar put crude on course for a fourth straight positive week.
China’s oil imports jumped over 22% in March to their highest level since June 2020, data showed on Thursday, as the country’s refineries ramped up production to meet fuel export demand and as local consumption picked up after the removal of most anti-COVID restrictions.
The data helped further the narrative that a recovery in China will spur oil demand to record highs this year, which the Organization of Petroleum Exporting Countries (OPEC) also reiterated in its monthly report.
Brent oil futures rose 0.1% to $86.42 a barrel, while West Texas Intermediate crude futures rose 0.5% to $82.53 a barrel by 21:11 ET (01:11 GMT).
Both contracts fell over 1% on Thursday after the OPEC warned that markets were not as tight as they were a year ago, and that while demand was improving going into summer, inventories still remained high. The cartel also expressed concerns over a potential recession and rising interest rates, which could stymie demand.
This saw traders lock in some recent profits, following a stellar run in crude this month.
Oil prices were set to rise between 1.3% and 2.3% this week, their fourth consecutive week of gains, underpinned largely by a surprise production cut by the OPEC earlier this month.
Weakness in the dollar, which sank to near one-year lows this week, aided commodities priced in the greenback, while markets also began pricing in an increased possibility that the Federal Reserve will pause its rate hike cycle by June.
This notion was furthered by softer-than-expected headline inflation data from the U.S., although core inflation still remained sticky.
But while crude prices were set to gain for a fourth straight week, their pace of gains appeared to be slowing, amid growing concerns over a U.S. recession this year. A slew of Federal Reserve signals showed that officials were concerned over a “mild” recession in 2023, especially as the effects of high interest rates are factored into the economy.
Slowing economic growth could potentially limit a recovery in crude demand later this year - a notion that has fueled some caution over oil markets in recent weeks.
Focus is now on a monthly report from the International Energy Agency, due later in the day, for more cues on crude.