Oil prices edge higher; growth worries limit gains

Oil prices rose on Monday, buoyed by supply concerns, but remained near three-week lows on fears that slower growth in major economies could curb demand.

Brent crude futures rose 46 cents, or 0.6%, to $80.40 a barrel by 1442 GMT. U.S. West Texas Intermediate (WTI) crude futures rose 20 cents, or 0.3%, to $73.59.

While recession fears dominated the market last week, prospects for China’s recovery after the relaxation of COVID-19 restrictions remains a driver for oil prices.

The International Energy Agency (IEA) expects half of this year’s global oil demand growth to come from China, the agency’s chief said on Sunday, adding that jet fuel demand was surging.

WTI and Brent slid 3% last Friday after strong U.S. jobs data raised concerns that the U.S. Federal Reserve would keep raising interest rates, which in turn boosted the dollar.

A stronger dollar typically reduces demand for dollar-denominated oil from buyers paying with other currencies.

Higher interest rates are checking price gains because they are likely to curtail economic growth and increases in fuel demand, analysts said. “A resilient labour market could buttress households’ willingness and ability to continue consuming and therefore support corporate earnings and equities over the near term,” investment strategy firm BCA Research said in a note.

“However … a reacceleration of aggregate demand could lead to a second wave of inflation.”

Supply concerns continued to affect markets, however, as operations at Turkey’s oil terminal in Ceyhan halted after a major earthquake struck nearby on Monday.

Also, price caps on Russian products took effect on Sunday, with Group of Seven (G7) nations, the European Union and Australia agreeing on price limits of $100 a barrel on diesel and other products that trade at a premium to crude and $45 a barrel for products that trade at a discount, such as fuel oil.

(Reporting by Noah BrowningAdditional reporting by Sonali Paul in Melbourne and Emily Chow in SingaporeEditing by Barbara Lewis, Arun Koyyur and David Goodman)