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Oil pared gains after the biggest daily surge in 16 months pushed prices back above $100 a barrel.

Futures in New York were trading near $103 after jumping 8.4% on Thursday. Crude has whipsawed this week on conflicting news about progress in negotiations between Russia and Ukraine. The International Energy Agency said Friday that prices could move significantly higher in the coming months, adding that the oil markets are in an emergency that could get worse. 

A renewed Covid-19 outbreak in China has compounded the moves, as the country imposes some of its weighiest virus-related restrictions since early 2020. President Xi Jinping

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pledged to reduce the economic impact of his Covid-fighting measures, signaling a shift in a longstanding strategy that has minimized fatalities but weighed heavily on the worlds second-largest economy.

West Texas Intermediate crude has swung by more than $16 a barrel this week, the latest sharp fluctuation. Brent has moved by more than $5 in each of the last 16 sessions — a record run. Both benchmarks are headed for a weekly loss.

Russias invasion of Ukraine has fanned inflation, providing a challenge to central banks and governments as they seek to encourage economic growth after the pandemic. The Federal Reserve this week

raised interest rates and signaled further hikes to tackle the fastest price gains in four decades.

The IEA earlier this week said Russias oil output

could slump by about a quarter next month, inflicting the biggest supply shock in decades as buyers shun the nations exports. On Friday, the agency said advanced economies could

curb their oil demand by reducing speed limits and using public transport to ease potential strains on the market.

Should the IEAs warnings prove to be prescient, there is little standing in the way of a hefty supply deficit in the coming months, said Stephen Brennock, an analyst at PVM Oil Associates. 

Prices
  • WTI for April delivery was little changed at $103.06 a barrel at 8:45 a.m. in New York. It earlier traded as high as $106.28.
  • Brent for May settlement fell 0.2% to $106.38 a barrel.

Russian

crude is still being treated with extreme caution by buyers worried about damage to their reputation or falling foul of sanctions. Since the invasion of Ukraine, the lions share of oil refining companies across Europe have said they will scale back

purchases from Moscow.

One of the most volatile corners of the oil market has been

diesel, partly because Russia is a major exporter to the rest of Europe. Open interest — the number of contracts outstanding in Europes main diesel contract — has fallen by more than half from its high last year, as traders take fright at the volatility.