By Barani Krishnan

Investing.com — Oil prices were little changed heading into Friday’s finish and the weekend as bulls and bears squared off in their quest to best the market’s recent resistance and support, despite fuel at U.S. pumps itself hitting record highs.

Two days of impressive gains that took the U.S. crude’s West Texas Intermediate grade to an eight-week high and briefly above its U.K. rival Brent for the first time since 2020 were offset by three days of equally surprising setback, leaving both benchmarks with insignificant progress from the prior week.

With about an hour to Friday’s settlement, New York-traded was up 36 cents, or 0.3%, to $110.25 a barrel. 

U.S. crude oil benchmark dropped 0.1% this week after reaching an 8-week high of $115.56 last Tuesday.

The London-traded crude oil benchmark was up 21c, or 0.2% to $112.35 per barrel.  Global crude oil benchmark rose 0.6% during the week to $115.69, a 7-week high.

“It’s been another volatile week of trade in oil but Brent and WTI are set to end it roughly where they started,” said Craig Erlam, analyst at online trading platform OANDA. “Price action remains very choppy. There are just so many forces at play at the minute and the increased economic gloom this week and Chinese reopening progress has only added to that.”

Erlam said that crude’s trajectory was still in the upward direction.

“Unless the economy substantially falters immediately, there isn’t much of a bearish case for crude currently — not in any significant way, anyway,” he added.

Oil rallied twice during the week on the back of hopes that the planned easing of Covid restrictions in Shanghai could improve fuel demand in China, the world’s largest importer of oil. 

The market also received support from bullish stockpiles and consumption data for U.S. crude oil, which was released Wednesday by the government.

Offsetting that was continued uncertainty on whether Europe would reach consensus to ban Russian oil to validate the EU disapproval over Moscow’s war in Ukraine.

Reports on Friday that US officials are working in Riyadh to organize a meeting between President Joe Biden (probably in Riyadh) and Crown Prince Mohammed bin Salman, was another bearish sign. An apparent improvement in the recently-strained diplomatic relations between these allies might force Riyadh, a major oil producer, to accept U.S. demands for additional supply.

Saudi Arabia is the head of the 23-state global oil exporters association OPEC+. For over a year, it has made sure that countries within the alliance provide crude less than the market requires to ensure the best prices per barrel.

OPEC+, which includes the original 13 countries under the Riyadh led Organization of the Petroleum Exporting Countries (OPEC) and the 10 other countries steered in part by Russia, has maintained a steady increase of around 430,000 barrels per month. That falls clearly short of demand that is at least 3 million barrels higher, as a direct consequence of the West’s sanctions on Russia that have de-legitimized an equal number of barrels that used to be on the market.

This week’s volatility in oil came despite record high U.S. fuel prices, with gasoline nearing $5 a gallon at some pumps while diesel was well above $6.

After the closing and downsizing many refineries in the aftermath of the coronavirus pandemic, fuel prices are at all-time highs. 

Refineries that have stayed in the business are now providing only what they can — or, more accurately, what they desire — without putting any of the money into expanding existing capacity or acquiring the idled plants that can be reopened to provide some measurable relief to consumers. The reason the refineries are doing this is to make record profits, which may be lost in expansion. Another factor is the slow turnaround time required for any new refinery in order to make a profit.

Bloomberg estimates that more than 1.0 million barrels per day of U.S. oil refining capacity — or about 5% overall — has shut since the Covid-19 outbreak initially decimated demand for oil in 2020. Outside of the United States, capacity has shrunk by 2.13 million additional barrels a day, energy consultancy Turner, Mason & Co says. It is clear that the situation will get worse as there are no expansion plans.

Saudi Energy Minister Abdulaziz bin Salman last week downplayed any connection between the record high fuel prices in the United States with OPEC+’s actions, saying the lack of refineries was to blame. 

“There is no refining capacity commensurate with the current demand and the expectation of the demand in the summer,” Abdulaziz said. 

His remarks were echoed by Bahrain’s Oil Minister Sheikh Mohammed Bin Khalifa Bin Ahmed. “There’s no new [refining] capacity coming,” the sheikh said. “Even if you produce more crude, there isn’t demand for it, there aren’t any more refineries.”