Oil rig, oil field
Representational image. Image Credit: Shutterstock

Crude oil continued to ride the announced supply cuts from OPEC+ to a five-week high, shaking off concerns of an economic slowdown.

Brent crude was up 3.81% to $97.99 a barrel and U.S. crude prices were up 4.48% at $92.43 a barrel.

Both Brent & WTI are heading for second weekly gain after OPEC+ supply cuts were announced this week.

Oil likely to return to $100

Oil prices jumped about 4% to a five-week high on Friday, lifted again by an OPEC+ decision this week to make its largest supply cut since 2020 despite concern about a possible recession and rising interest rates.

Brent futures rose $3.62, or 3.8%, to $98.04 a barrel by 1:31 p.m. EDT (1731 GMT), while U.S. West Texas Intermediate (WTI) crude rose $4.05,or 4.6%, to $92.50.

Oil kept rallying even as the dollar moved higher after data showing the U.S. economy was creating jobs at a strong pace gave the Federal Reserve a reason to continue hefty interest rate hikes.

A strong dollar can pressure oil demand, making crude more expensive for other currency holders.

Brent was on track for its highest close since Aug. 30 and WTI on track for its highest close since Aug. 29. It was also their fifth daily rise in a row and second straight weekly gain.

In addition, both contracts entered technically overbought territory, for the first time since August for Brent and June for WTI.

For the week, Brent was up about 11% and WTI up about 16%.

Both would be the biggest weekly percentage gains since March.

Heating futures

U.S. heating oil futures jumped 19% this week, putting the heating oil crack spread —  a measure of refining profit margins —  on track for its highest close on record, according to Refinitiv data going back to December 2009.

The Organization of the Petroleum Exporting Countries and allies including Russia, known as OPEC+, agreed this week to lower their output target by 2 million barrels per day.

"Among the key ramifications of OPEC's latest cut is a likely return of $100 oil," said Stephen Brennock of oil broker PVM.

UBS Global Wealth Management also projected Brent would "move above the $100 bbl mark over the coming quarters." The OPEC+ cut comes ahead of a European Union embargo on Russian oil and will squeeze supply in an already tight market.

OPEC Secretary General Haitham al-Ghais said the output target cuts will leave OPEC+ with more supply to tap in the event of any crises.

On Thursday, U.S. President Joe Biden expressed disappointment over the OPEC+ plans. He and U.S. officials said Washington was looking at all possible alternatives to keep prices from rising.

The U.S. oil rig count, however, fell by two this week to 602, according to energy services firm Baker Hughes Co, as high inflation forces producers to spend more money to secure workers and equipment.

"Oil futures prices are managing to gain upside traction even though widespread inflation across the US and Europe is threatening the potential for a global recession where demand will likely take a sizeable hit," analysts at energy consulting firm Gelber & Associates said.

In Europe, divisions between European Union leaders over capping gas prices and national rescue packages resurfaced, with Poland accusing Germany of "selfishness" in its response to a winter energy crunch caused by Russia's war in Ukraine.

(Additional reporting by Mohi Narayan in New Delhi and Alex Lawler in London; editing by Kirsten Donovan and David Gregorio)