SINGAPORE: In a year marked by tight supplies as a result of the conflict in Ukraine, a strong dollar, and weak demand from China, the world's largest crude importer, oil prices edged up on Friday and were on track to record a meager gain for the second consecutive year.
By 0138 GMT, Brent crude futures had risen 44 cents, or 0.5 percent, to $83.90 a barrel after settling 1.2 percent lower in the previous session.
After closing 0.7% lower on Thursday, US West Intermediate crude was at $78.88 a barrel, up 48 cents, or 0.6 percent.
After rising 50.2% in 2021, Brent is expected to finish 2022 with a gain of 5.76 percent. After Russia invaded Ukraine and raised concerns about supply and energy security, prices surged in the second quarter to a peak of $139.13 per barrel, a level not seen since 2008.
After gaining 55% last year, the WTI is expected to rise 4.5 percent in 2022.
According to ING analyst Ewa Manthey, "this year has been an extraordinary year for commodity markets with supply risks leading to increased volatility and elevated prices."
"It is anticipated that next year will be yet another year of volatility and uncertainty."
As central banks around the world increased interest rates to combat inflation and strengthened the US dollar, oil prices experienced a rapid decline in the second half of the year. As a result, holders of other currencies found it more expensive to invest in commodities denominated in dollars.
Additionally, China's zero-Covid restrictions, which were only eased in December, dampened expectations for a recovery in oil demand at the No. 2 customers. Even though China is expected to recover in 2023, concerns about a global recession and an increase in Covid cases are clouding the outlook for commodities demand.
"Oil demand was anticipated to rise as travel restrictions were eased recently; John Driscoll, director of consultancy JTD Energy Services, stated, "However, the sharp increase in Covid cases in China has raised serious concerns over a potential global outbreak."
Russia will be forced to divert more crude and refined product exports from Europe to Asia as a result of Western sanctions in the future.
In the US, yield development in top oil-creating states has eased back notwithstanding more exorbitant costs. According to the findings of the most recent survey conducted by the Federal Reserve Bank of Dallas, executives have lowered their expectations as a result of inflation, issues with supply chains, and economic uncertainty.