Oil prices set for weekly climb, but cloudy outlook caps gains

Oil prices fell on Friday as recession fears clouded the demand outlook yet remained on track for a weekly rise.

Brent crude futures were down $1.15, or 1.2%, to $98.45 a barrel 1110 GMT, while U.S. West Texas Intermediate (WTI) crude futures fell $1.48 or 1.6% to $92.86 a barrel.

Brent was on track to rise nearly 4% this week after last week's 14% tumble, its biggest weekly decline since April 2020 amid fears that rising inflation and interest rate hikes will hit economic growth and demand for fuel.

Uncertainty capped price gains as the market absorbed contrasting demand views from the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA).

"We are seeing an economic slowdown, but its unclear if it's as big a slowdown as some of the recent outlooks have been predicting," said Ole Hansen, head of commodity strategy at Saxo Bank. "The demand will ebb and flow, but supply is still the main concern."

On Thursday, OPEC cut its forecast for growth in world oil demand in 2022 by 260,000 barrels per day (bpd). It now expects demand to rise by 3.1 million bpd this year.

In contrast, the IEA raised its demand growth forecast to 2.1 million bpd citing gas-to-oil switching in power generation.

"There's a great deal of uncertainty about demand in the short run. Until that settles, it (the market) will be like this for a while," said Justin Smirk, a senior economist at Westpac.

The IEA also raised its outlook for Russian oil supply by 500,000 bpd for the second half of 2022, but said OPEC would struggle to boost production.

"The oil market has bounced back this week, with Brent once more flirting with triple figures," said Craig Erlam, senior market analyst at Oanda in London.

"All things considered, the price moves highlight just how tight the market remains and how sensitive it therefore still is to spikes."