Oil prices rise Friday morning on prospects of a less hawkish monetary policy from the US Federal Reserve. Uncertainty over improved demand puts a cap on the gains, however.

A barrel of European benchmark crude Brent costs USD 100.10 Friday morning against USD 96.90 Thursday afternoon. US counterpart West Texas Intermediate trades concurrently at USD 96.43 against USD 93.13 Thursday afternoon.

”Oil is trading very much to the beat of Federal Reserve policy and the implications it could have on both demand destruction and the US dollar,” notes managing partner at SPI Asset Management Stephen Innes.

On Thursday, several of the Fed’s most hawkish members noted that they advocate an interest rate hike of 0.75 basis points instead of a hike of 100 basis points as speculated by the market in the wake of inflation rising to 9.1% year over year, which was higher than projections of a 8.8% climb.

This allows oil prices and the market slightly more breathing room, notes Innes to Reuters.

Oil prices have been going down amid fears of a recession spurred by the Fed’s aggressive monetary policy.

At the same time, concerns over demand have kept price increases in check.

”Sentiment hasn’t been helped by renewed COVID-19 outbreaks in China, which threaten to halt the recovery in demand. High prices also appear to have blunted demand for gasoline in the US,” note analysts of ANZ Research to Reuters.

Output at Chinese refineries has dropped by almost 10% in June compared to the same month last year. This is the first annual decline since 2011.

This Friday, US President Joe Biden will be flying to Saudi Arabia where he will take part in a summit with member nations of the Organization of Petroleum Exporting Countries. However, there is limited capacity among several members, many of which are pumping oil at full tilt. Meanwhile, it is still uncertain how much Saudi Arabia is capable of boosting its output.

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