Oil prices rose about 2 per cent in volatile trade on Friday but still posted a weekly decline as investors worried about a potential recession-driven demand downturn even as global fuel supplies remained tight.
Brent, the global benchmark, rose about 2.3 per cent, to settle at $107 a barrel at the close of trading on Friday. West Texas Intermediate, the gauge that tracks US crude, closed 2 per cent higher to $104.8 a barrel. Both benchmarks traded in negative territory in the past week and then rebounded from session lows.
Brent posted a weekly drop of about 4.1 per cent and WTI a loss of 3.4 per cent, following on from the first monthly decline since November. Prices tumbled on Tuesday, when Brent's $10.73 drop was the contract's third-biggest daily fall since it started trading in 1988.
"The primary reason for the current selling pressure on oil prices is that traders are concerned about the possible threat of recession taking place and having a negative influence on the prices," said Naeem Aslam, chief market analyst at London-based Avatrade.
"In addition to this, many traders also believe that the worst could be behind us in terms of the oil supply shock as all the sanctions that the US and its allies were going to impose on Russia are already done."
Central banks around the world are raising interest rates to tame inflation, spurring fears that rising borrowing costs could stifle growth, while mass Covid-19 testing in Shanghai this week caused worries about potential lockdowns that could also hit oil demand.
Recession concerns are growing worldwide amid mounting inflationary pressures, subsequent monetary policy tightening by central banks and the lingering impact of the global health crisis.
US non-farm payroll data showed the economy added more jobs than expected in June, a sign of persistent labour market strength that gives the Federal Reserve ammunition to deliver another 75 basis-point rate hike this month.
"The oil market is looking at the jobs report as a double-edged sword," said Phil Flynn, analyst at Price Futures Group.
"The jobs number was positive from a demand perspective. On the bearish side, the market is concerned that if the jobs market is strong, the Fed can be more aggressive with raising rates."
Edward Moya, a senior market analyst at Oanda said economic growth fears may have been "overdone" as the oil market looks poised to remain tight for the foreseeable future.
"After testing the mid-$90s, the selling pressure for WTI crude has been completely exhausted. Oil prices will likely comfortably trade above the $100 a barrel level as the risk of interruptions to supplies remains elevated. Kazakh and Russian oil shortages could keep oil prices heading higher into next week," Mr Moya said.
US energy companies added two oil rigs over the past week, bringing the total to 597, the highest since March 2020, Texas-based energy services provider Baker Hughes said.
Oil prices soared during the first half of 2022. Brent neared the record high of $147 after Russia launched its invasion of Ukraine in February, adding to supply concerns.