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Oil's comeback rally after its worst week since Mar has been snuffed out by renewed fears of recession and higher-for-longer interest rates in the U.S. to Europe - despite this week's support from the shutdown of Canadian oil pipeline Keystone, which supplies crude to refineries in the U.S.

Brent crude for delivery in Feb settled down 2.7%, at USD79.04 on Fri. WTI crude for delivery in Jan settled Fri's trade down 2.4% at USD74.29. Both benchmarks rose 4% for the week after a 11% drop the last week.

There were also fears that China's coronavirus contagion could get out of hand again amid reports of rising fatalities. "If COVID spreads freely and many people cannot get care, we estimate that in the coming months 1.5 m Chinese people will die from the virus," The Economist said.

On the positive side, there was just modest support for the market on Fri from news that the Biden administration will start refilling the heavily drawn-down U.S. Strategic Petroleum Reserve, or SPR, from Feb with an initial purchase of 3m barrels.

The administration has drawn down some 200m barrels from the SPR over the past year, sending inventories in the reserve to 38-year lows, as it attempted to bridge a global supply deficit in crude caused by Russia's invasion of Ukraine and consequent sanctions on Moscow.

The positive tone in oil was also offset somewhat on Fri by a Biden administration official saying the SPR would also loan out 2 m barrels to domestic energy companies to relieve any supply shortage caused by the Keystone pipeline's closure. The Keystone pipeline is a critical artery shipping heavy Canadian crude from Alberta to U.S. refiners in the Midwest and the Gulf Coast. It has been closed for a week now, after causing what officials say is the largest U.S. oil spill in a decade.

Under the SPR loan arrangement reported Fri, companies will immediately receive an x-amount of barrels from the reserve to resolve the supply crunch emanating from the Keystone crisis and return them much later, at a mutually-agreed time.

"It's a smart hedge, if you ask me," John Kilduff, a partner at Again Capital, said, referring to the two countervailing decisions involving the SPR. "Instead of announcing a massive purchase that would take care of the entire 180 m barrels that were drawn down the last 6 months, the administration chose to just begin with a 3 m barrel purchase. The positive impact on the market will be minimal, just as U.S. consumers at the pump would have liked."