By Ambar Warrick
Investing.com-- Oil prices rose slightly on Friday as investors speculated over the prospect of a production cut by the OPEC, while optimism over a recovery in Chinese demand and signs of tightening U.S. supply put crude markets on course for a positive week.
The Organization of Petroleum Exporting Countries and allies (OPEC+) is set to meet on Sunday, December 4, to decide on future supply. While the cartel has signaled that it will consider recent declines in oil prices into its decision, it has given no clear indication that it will cut production.
Brent Oil Futures rose 0.1% to $87.06 a barrel in early Asian trade, while West Texas Intermediate crude futures rose 0.1% to $81.36 a barrel. Brent was set to add nearly 4% this week, while shrinking U.S. inventories saw WTI surge more than 6% this week.
The OPEC had announced a 2 million barrel per day production cut in October, which saw oil prices briefly surge to as high as $100 a barrel. But they had swiftly retreated from this level, with oil nursing steep losses for November as rising COVID-19 cases in China brewed uncertainty over future demand.
But a swathe of unprecedented protests in China, against the government’s strict anti-COVID policy, drove up hopes that the country will scale back its COVID-related restrictions.
Two major Chinese cities relaxed some movement and quarantine restrictions this week to calm rampant protests, driving up hopes for a bigger reversal.
PMI data released this week also highlighted deepening cracks in the Chinese economy, ramping up pressure on the government to loosen restrictions and help restore economic growth.
Still, Beijing has given no clear signals that it will relax restrictions.
Signs of tightening U.S. crude supply also boosted markets this week. Data showed that U.S. inventories shrank substantially more than expected in the prior week, indicating high demand among refiners.
The government has also largely reduced the pace of its drawdowns from the Strategic Petroleum Reserve, which heralds smaller crude inventories in the coming months.
But fuel demand among consumers remained languid, as indicated by a sustained build in gasoline inventories.
Weakness in the dollar also benefited crude prices this week, with focus now turning to U.S. nonfarm payrolls data that is broadly expected to factor into monetary policy.
The Fed signaled this week that it will raise interest rates by a smaller margin in the coming months, which also supports the outlook for crude prices.