Oil dips 1% on way to weekly loss as markets weigh Chinese demand

By Arathy Somasekhar

HOUSTON (Reuters) -Oil prices dipped 1% on Friday and were set to close lower for the week as markets remained wary of Chinese demand even as producer group OPEC+ extended supply cuts.

Brent crude futures were down 94 cents, or 1.1%, at $82 a barrel by 01:06 p.m. ET (1806 GMT). U.S. West Texas Intermediate crude futures were down $1.02, or 1.3%, at $77.92.

Both benchmarks were on track for weekly declines, with Brent down 1.1% and WTI 2.6%.

"While supplies have remained on the tighter side given OPEC's production cuts and Russian sanctions slowing exports, demand from China looks to be lagging and U.S. driving season demand has yet to kick in," said Dennis Kissler, senior vice president of trading at BOK Financial.

U.S. job growth rose by 275,000 new nonfarm payrolls in February, according to the Bureau of Labor Statistics, beating expectations of a 200,000 rise according to a Reuters survey.

But the unemployment rate also rose and wage growth decelerated, indicating that the U.S. economy could be slowing which kept on the table an anticipated interest rate cut in June from the Federal Reserve.

The data suggests "a less tight job market, supporting the soft landing narrative and increasing the odds of a June rate cut," UBS analyst Giovanni Staunovo said.

Meanwhile, China this week has set an economic growth target for 2024 of around 5%, which many analysts say is ambitious without much more stimulus.

OPEC+ members led by Saudi Arabia and Russia agreed on Sunday to extend voluntary oil output cuts of 2.2 million barrels per day into the second quarter, giving extra support to the market amid concerns over global growth and rising output outside the group.

However, crude production in OPEC+ countries increased by 212,000 barrels per day (bpd) in February over January output, according to Rystad Energy data and research.

Oil markets have homed in on signals on the timing of possible rate cuts in the United States and European Union in the previous two sessions.

Lower interest rates could increase oil demand by boosting economic growth.

The European Central Bank (ECB) will likely start lowering interest rates some time between April and June, French central bank head and ECB policymaker Francois Villeroy de Galhau said on Friday.

U.S. Federal Reserve Chair Jerome Powell said on Thursday that the central bank was "not far" from gaining enough confidence that inflation is falling sufficiently to begin cutting interest rates.

TC Energy's Keystone oil pipeline resumed service on Thursday after going offline and temporarily restricting a major conduit of Canadian oil to the United States, which sent oil prices higher briefly on Thursday.

(Reporting by Arathy Somasekhar in Houston, Robert Harvey in London, Katya Golubkova in Tokyo and Emily Chow in SingaporeEditing by Kirsten Donovan, David Gregorio)