Sonali Paul

MELBOURNE, (Reuters) – Oil prices rose in the early hours of Friday trade but are heading for their first weekly loss in three weeks. Concerns about rising inflation and China locking down COVIDs will slow global growth.

Futures were 0.9% higher at $108.42/barrel at 0008 GMT. U.S. West Texas Intermediate oil futures increased $1.00 (or 0.9%) to $107.13/barrel

The benchmark contracts saw declines in both Brent and WTI, but they were still on the right track for a week. Brent fell more than 3.3%, while WTI dropped more than 2.2%.

The prospect that the European Union will ban Russian oil from its market continues to push and pull on the market. There are also concerns over sapping supplies and reducing demand.

Vivek Dhar, a commodities analyst at Commonwealth Bank said that “the demand concern factors” have increased quite a lot.

The U.S. dollar has reached 20-year highs due to inflation and rate increases. This has limited oil price growth because a strong dollar makes it more costly for other currencies.

However, analysts continue to be focused on the possibility of an EU ban on Russian oil after Moscow placed sanctions on European Gazprom units (MCX:), and Ukraine stopped gas transit routes.

Stephen Innes (SPI Asset Management managing Partner) said, “Oil finds support from supply concerns and Russia takes another step forward in weaponizing energy.”

A report by the International Energy Agency on Thursday highlighted two factors that are affecting the market. It said rising oil production from the Middle East, the United States, and slowdowns in demand growth were “expected to mitigate an acute supply shortage amid worsening Russian supplies disruption”.

According to the agency, Russia’s output fell by almost 3 million barrels per hour (bpd), or three times as much as is currently being displaced if sanctions against it for their war in Ukraine are increased or deterred further purchasing.