Crude oil edges higher; potential Russian output cuts help tone

By Peter Nurse 

Investing.com -- Oil prices edged higher Friday as the likelihood of hefty cuts to Russian crude exports outweighed rising inventories in the United States and concerns over global economic activity.

By 08:45 ET (13:45 GMT), U.S. crude futures traded 0.2% higher at $75.50 a barrel, while the Brent contract rose 0.2% to $82.33 a barrel.

Helping the market move higher Friday was a Reuters report that stated Russia, the world's third largest crude producer, plans to cut up to 25% of oil exports from its western ports in March, which is more than the 500,000 barrel per day supply cut that Moscow had announced earlier this week.

Such a move, if the Organization of Petroleum Exporting Countries also continues to cut its output, could result in the market swinging into a deficit later this year, or maybe next, particularly if China, the world's largest importer, picks up its economic growth after abandoning its Zero-COVID policy.

That said, both benchmarks are still on course to register losses this week, if minor, after the U.S. registered another build in crude stocks, suggesting a slowdown in demand in the world's largest consumer.

"Crude oil inventories increased by 7.65MMbbls, the ninth consecutive week of inventory builds," said analysts at ING, in a note. "Since mid-December, US commercial crude inventories have increased by around 61MMbbls."

Concerns have also been building that sticky inflation will persuade the U.S. Federal Reserve to continue with its monetary tightening for longer and to a higher level than previously expected, potentially weighing on future growth.

Additionally, these hikes provide a tailwind for the U.S. dollar, making oil, which is denominated in the greenback, more expensive for international buyers.

Data released earlier Friday showed that the core PCE price index, the Fed's preferred gauge of inflation, rose 0.6% on the month in January, above the 0.4% expected. The annual figure climbed 4.7%, above the 4.3% expected.

The German economy, the largest in the Eurozone, shrunk by 0.4% - twice as much as first estimated – in the final quarter of last year, providing a reality check to any optimistic thoughts of an economic recovery in the region.

The Baker Hughes rig count – in decline since November – and the CFTC's net speculative positioning data round off the week later.