Oil prices dropped on Friday as traders awaited additional economic clues from US jobs data, but were on track for significant weekly gains after OPEC+ announced its largest supply cut since the start of the pandemic.
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Brent oil futures declined 0.4% to $94.43 per barrel, while West Texas Intermediate crude futures were flat at $88.53 per barrel. This week, both futures were up 7.4% and 11%, respectively, and were on track for their highest weekly gain since the beginning of the Russia–Ukraine war this year.
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Prices rose for four straight days, rising strongly from eight-month lows early this year as markets braced for considerably tighter supplies this year. The Organization of Petroleum Exporting Countries and its allies, known as OPEC+ have announced a two million barrel per day reduction in output over the coming months.
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The move was partly in response to this year’s steep drop in oil prices, with OPEC+ expressing concern about prices remaining below $90 per barrel. Crude oil prices remain significantly below their yearly highs, having been battered by a rising greenback and fears that rising interest rates and inflation could diminish demand.
Friday’s nonfarm payrolls data is likely to shed further insight on that part of the market, as the report is expected to weigh into the Federal Reserve‘s intentions to raise interest rates.
On Thursday, US President Joe Biden voiced disappointment with OPEC+’s plans, and he and officials stated the US was considering all options to keep prices from increasing. Some of these alternatives include releasing additional oil from the Strategic Petroleum Reserve.
Goldman Sachs has upped its oil price projection for this year and 2023, citing the OPEC+ supply cut as “very bullish” for future pricing. It increased its Brent price projection for 2022 to $104 per barrel from $99 per barrel, and its forecast for 2023 to $110 per barrel from $108 per barrel.
The dollar strengthened on Friday, knocking the pound and euro off their intra-week highs in early Asian trade, as the Japanese yen surpassed 145 per dollar.
The US dollar index was up 0.04% at 112.29, having risen more than 1% overnight and moved away from the week’s low of 110.05.