Oil rises almost $2 a barrel, still set for weekly drop on recession fears

U.S. Federal Reserve Chair Jerome Powell said the central bank's focus on curbing inflation was "unconditional", adding to fears about more interest rate hikes that have weighed on financial markets

By Alex Lawler

LONDON (Reuters) -Oil rose by almost $2 a barrel on Friday supported by tight supply, although crude was heading for a second weekly fall on concern that rising interest rates could push the world economy into recession.

U.S. Federal Reserve Chair Jerome Powell said on Thursday the central bank's focus on curbing inflation was "unconditional", adding to fears about more interest rate hikes that have weighed on financial markets.

Brent crude was up $1.68, or 1.5%, at $111.73 a barrel by 1155 GMT, while U.S. West Texas Intermediate (WTI) crude gained $1.84, or 1.8%, to $106.11. Both benchmarks were heading for a second weekly decline.

"Increasing recession fears appear to be prompting a culling of heavy speculative long positioning in both contracts, even as in the real world, energy tightness is as real as ever," said Jeffrey Halley, analyst at brokerage OANDA.

Oil came close this year to an all-time high of $147 reached in 2008 as Russia's invasion of Ukraine exacerbated tight supplies just as demand has been recovering from the COVID pandemic.

Crude has gained support from the almost total shutdown of output in OPEC member Libya due to unrest. The Libyan oil minister said on Thursday the National Oil Corporation chairman was withholding production data from him, raising doubts over figures he issued last week.

Stephen Brennock of oil broker PVM said recession fears dominated sentiment, adding: "That being said, the consensus remains that the oil market will see high demand and tight supply over the summer months, thereby limiting the downside."

The Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, meet on June 30 and are expected to stick to an earlier plan to accelerate slightly hikes in oil production in July and August, rather than provide more oil.

The latest U.S. oil inventory figures, which will give a snapshot of supply tightness in the top consumer, have been delayed to next week.

(Additional reporting by Jeslyn Lerh in Singapore; editing by Edmund Blair and Jason Neely)