Oil prices dipped in midday trading on Friday but were still on track to record a large weekly gain on concerns of tightening supply and a weaker dollar.

Brent, the benchmark for two thirds of the world’s oil, was trading 0.50 per cent lower at $76.10 a barrel at 12.04pm UAE time. West Texas Intermediate, the gauge that tracks US crude, was down 0.52 per cent at $72.10 a barrel.

This week, worries about crude oil supply intensified when a drone strike – which Moscow blamed on Ukraine – hit a Caspian Pipeline Consortium (CPC) pumping station in Russia's Krasnodar region.

Moscow said that oil shipments through the pipeline, Kazakhstan's main export route, had dropped by 30-40 per cent. landlocked Kazakhstan depends on the pipeline for more than 80 per cent of its oil exports and lacks alternative transportation options.

The Central Asian country has achieved record-high oil production levels despite damage to its export route, Reuters reported on Thursday, citing industry sources. The country’s oil and gas condensate production reached about 2.12 million barrels per day (bpd) on February 19, the sources said.

Oil markets have been volatile in recent weeks as investors weigh the prospects of a global trade war and a possible end to the Russia-Ukraine conflict, which could lead to the lifting of sanctions on Moscow’s energy industry.

This week, Washington and Moscow began talks aimed at ending the war that began with Russia's full-scale invasion of Ukraine in February 2022.

“While we anticipate the prospect of a peace agreement between Russia-Ukraine to have sizeable ramifications for natural gas, any associated easing in sanctions on Russia is not likely to comprise considerable increases in aggregate Russian crude oil flows,” MUFG said in a research note on Thursday.

Russia's crude oil production is limited by its Opec+ target of 9 million bpd, rather than by current sanctions, which affect the destination of its exports but not the overall volume, the Japanese lender said.

Despite US pressure to reduce prices, Opec+ is considering delaying planned monthly production increases set to begin in April, according to a Bloomberg report from Tuesday.

The group has held back 5.86 million bpd of supply from the market as part of a series of output curbs since 2022. It plans to gradually restore a total of 2.2 million bpd through monthly increases by late 2026.

Oil prices were also supported this week by a weaker dollar, lowering the cost of oil for investors.

After reaching its lowest point of the year, dipping below 106.4 on Thursday, the US Dollar Index, which tracks the greenback's value against a group of major currencies, was up by 0.10 per cent at 106.48 at 11.57am UAE time.

The dollar weakened after Mr Trump hinted at a potential trade deal with China, easing market uncertainty surrounding tariffs.

On Wednesday, the US President said he expected Chinese President Xi Jinping to visit the US, though he did not provide a timeline for the visit.

Mr Trump told reporters on Air Force One that a new trade deal between the US and China is “possible”.

Source: THENATIONALNEWS