Investing.com -- Oil prices rose in Asian trade on Friday, and were on course to settle higher after a volatile week as optimism over raising the U.S. debt ceiling largely offset fears of bloated supply and worsening economic conditions.
While crude prices still retreated on Thursday, they retained a bulk of gains made this week after U.S. policymakers signaled some progress towards raising the U.S. debt limit and avoiding a default.
Traders also bought back into heavily discounted markets after four straight weeks of losses.
Brent oil futures rose 0.7% to $76.42 a barrel, while West Texas Intermediate crude futures rose 0.7% to $72.33 a barrel by 23:06 ET (03:06 GMT). Both contracts were set to add between 2% and 3% this week - their biggest weekly gain since early-April.
Crude markets were cheered by the Biden administration signaling that it will begin refilling the Strategic Petroleum Reserve, as well as signs of increased U.S. fuel demand ahead of the summer season.
But the outlook for oil markets still remained dismal, especially as weak economic data from China continued to trickle in. Softer-than-expected industrial production and retail sales readings released this week suggested that a post-COVID rebound in the country was stalling, which in turn cast doubts over China driving a recovery in oil demand this year.
A stronger dollar also limited gains in crude markets, given that it makes commodities more expensive for overseas buyers. The dollar was boosted by a flurry of hawkish comments from Federal Reserve officials this week, who warned that stubborn inflation was likely to keep rates higher for longer.
A bigger-than-expected drop in weekly jobless claims furthered this notion on Thursday, driving the dollar to a near two-month high. Focus is now on a panel discussion involving Fed Chair Jerome Powell later on Friday, for any more cues on monetary policy.
Fears of rising interest rates and slowing economic growth have been a key weight on oil prices this year, with markets fearing that a U.S. and potentially global recession will stymie crude demand.
Crude supplies in the world’s largest oil consumer also remained bloated, data showed this week, as U.S. inventories grew at their fastest pace in nearly three months in the week to May 12.