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KUALA LUMPUR: Oil prices rose as much as $1 on Friday on signs of improving fuel demand, but further gains were capped as markets awaited clues on the prospect of a rate hike in a speech by the Federal Reserve chair later in the day.
Brent crude futures were up 87 cents, or 0.9%, at $100.21 a barrel by 0410 GMT. U.S. West Texas Intermediate (WTI) crude futures also rose 88 cents, or 0.9%, to $93.40 a barrel. Both contracts were up $1 in early trade after falling about $2 on Thursday.
Despite uncertainty over the pace of U.S. interest rate hikes to combat soaring inflation, concerns about demand destruction for oil eased this week, putting the benchmark oil contract on track to gain about 3 percent this week.
Analysts at ANZ Research said comments from some U.S. central bankers ahead of Chairman Jerome Powell’s speech on Friday cast a cloud over the economic backdrop.
“Nevertheless, signs of strong demand are emerging,” ANZ research analysts said in a note, citing data encouraging road traffic growth.
“The latest Congestion Index data from TomTom shows strong weekly increases in traffic levels across Asia Pacific, Europe and North America in the week to 24 August.”
Congestion levels in China have also rebounded, ANZ noted, pointing to Baidu’s data.
The prospect of OPEC production cuts to offset higher Iranian output also supported prices.
OPEC+ production cuts proposed by Saudi Arabia this week could coincide with Iran’s return to the oil market if Iran reaches a nuclear deal with the West, sources told Reuters.
CMC Markets analyst Tina Teng said the crude oil market was likely to remain supported as the supply cartel signaled it would cut output if prices weakened.
Tehran is reviewing Washington’s response to a final proposal drawn up by the European Union to revive the nuclear deal, and the EU expects a response soon. However, it is unclear how quickly Iranian oil exports will resume if a deal is reached.
If sanctions on Iran are lifted, it could take about a year and a half to reach full capacity of 4 million bpd, an increase of 1.4 million bpd from current production.
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