Oil prices fell in early trade on Friday but were on track for gains of more than 6% for the week on strong signs of rising demand in top crude importer China and expectations of less aggressive rate hikes in the United States .
Brent crude futures were down 33 cents, or 0.4%, at $83.70 a barrel by 03:22 GMT, while U.S. West Texas Intermediate (WTI) crude futures were down 20 cents, or 0.3%, to $78.19.
Brent has jumped 6.7% so far this week and WTI is up 6.2%, recovering most of last week’s losses.
Analysts said recent Chinese crude purchases and a rise in road traffic fueled confidence in a recovery in demand in the world’s second-largest economy after it opened its borders and eased COVID-19 restrictions following protests last year .
“Given the focus on energy security, we expect Chinese imports to continue to increase, particularly as refining ramps up and crude storage remains a strategic priority,” Michael Tran, RBC commodities strategist, said in a client note.
In another encouraging sign, ANZ analysts said the congestion index covering the 15 Chinese cities with the highest number of vehicle registrations had risen 31% from the previous week.
Oil prices were also boosted by the dollar sliding to a near nine-month low after data showed U.S. inflation fell for the first time in 2-1/2 years, boosting expectations that the Federal Reserve will slow the pace of interest rate increases.
A weaker dollar tends to boost demand for oil as it makes the commodity cheaper for buyers holding other currencies.
But some of the week’s gains will likely be wiped out in Asian trade, said Vandana Hari, founder of oil market analysis provider Vanda Insights.
“Crude is under correction, albeit modestly…. The past two sessions have been driven almost entirely by renewed hopes of a Fed pivot, which, based on the experience of the past quarter, tends to be a short-lived phenomenon,” Harry said.