• Oil looks set to end the week on the front foot, with WTI set to end the week near $110.
• Anticipation of imminent agreement on an EU embargo on Russian oil is being cited as supportive.
• Growth worries, China lockdown risks and torrid conditions in equity markets are for now stopping WTI from pushing above $110.

Global oil prices continued to rise on Friday and look on course to post a second successive weekly gain. Front-month WTI futures were unable to break above Thursday’s highs in the $111.00s per barrel, but nonetheless was last trading up by nearly $1.50 near the $110 mark, with weekly gains currently standing at over $5.50. Market commentators continued to cite expectations for EU nations to soon reach an agreement on a phased Russian oil import ban as supporting the price action.

Sources told Reuters on Friday that the EU is looking at ways to appease some of the small EU nations that have so far refused to sign up for the ban. Another factor being cited as supporting the price action is OPEC+ continued slow pace of bringing fresh supply back to the market. The cartel agreed earlier this week to stick to its current policy of lifting output quotas by 432K barrels per day each month, though there is little confidence that the group will actually be able to meet this output hike target, as Russian output falls amid Western sanctions and smaller OPEC+ nations struggle amid chronic underinvestment.

“The looming EU embargo on Russian oil has the makings of an acute supply squeeze,” one oil market analyst at broker PVM said on Friday. “In any case, OPEC+ is in no mood to help out, even as rallying energy prices spur harmful levels of inflation,” they added.

WTI bulls continue to eye a test of late-March highs in the $116.00s, though for now, worries about slowing global growth and demand in China amid ongoing lockdowns in major cities there is holding back the upside. In its latest forecasts, the Bank of England on Thursday forecast a decent chance of a recession in the UK in 2023 and it is feared that the Eurozone economy may be headed the same way.

Meanwhile, torrid conditions in US (and global) equity markets as investors fret about aggressive Fed tightening, slowing growth, geopolitical risks and China lockdowns risks is also likely dampening crude oil upside. Though weakened as of late, WTI historically has a positive correlation to US equities given its status as a risk-sensitive commodity.