© Reuters. FILE PHOTO: A petrol station attendant prepares to refuel a car in Rome, Italy, January 4, 2012. REUTERS/Max Rossi/File Photo

By Scott DiSavino

NEW YORK (Reuters) -Oil prices climbed about 3% to a nine-week high on Friday as supply concerns and technical buying outweighed fears that further interest rate hikes could slow economic growth and reduce demand for oil.

futures rose $1.95, or 2.6%, to settle at $78.47 a barrel, while U.S. West Texas Intermediate crude (WTI) rose $2.06, or 2.9%, to settle at $73.86.

That was the highest close for Brent since May 1 and WTI since May 24. Both benchmarks ended up about 5% for the week.

“We’re knocking on the door of a major breakout to the upside. I think you’re seeing some short covering here today … because a lot of people have been betting on the short side, said Phil Flynn, an analyst at Price Futures Group.

After two months of price consolidation between roughly $73-77, Brent moved into technically overbought territory for the first time since mid April.

“The rally over the last week or so … has been quite strong and backed by momentum – as well as fresh cuts from Saudi Arabia and Russia,” said Craig Erlam, a senior market analyst at OANDA.

Top oil exporters Saudi Arabia and Russia announced fresh output cuts this week bringing total reductions by OPEC+, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, to around 5 million barrels per day (bpd), or about 5% of global oil demand.

“OPEC+ production cuts are expected to tighten the market, driving supply deficits in the second half of 2023, supporting higher oil prices,” analysts at U.S. financial services company Morningstar said in a note.

OPEC will likely maintain an upbeat view on oil demand growth for next year, sources close to OPEC said.

Russia’s latest pledge to reduce oil exports will not require a similar cut in production, a government source told Reuters.

Oil analytics firm Vortexa said there are currently 10.5 million barrels of Saudi crude in floating storage off the Egyptian Red Sea port of Ain Sukhna, down by almost half from mid-June.

In the U.S., energy firms this week added oil and rigs for the first time in 10 weeks, due to the biggest weekly increase in gas rigs since October 2016, according to energy services firm Baker Hughes Co.

In Norway, Equinor ASA (NYSE:) paused production at its Oseberg East oil field in the North Sea due to staffing shortages.

In Mexico, six people were injured after a fire broke out on Friday morning at an offshore platform run by state oil company Pemex in the Gulf of Mexico.

Also supporting crude prices, the U.S. dollar fell to a two-week low after data showed U.S. job growth was lower than expected but still strong enough to likely lead the U.S. Federal Reserve (Fed) to resume raising interest rates later this month as it has signaled.

A weaker dollar makes crude cheaper for holders of other currencies, which could boost oil demand.

According to the CME Group Inc (NASDAQ:)’s FedWatch Tool, the probability that the Fed increases interest rates by 25 basis points at its July 25-26 meeting is now around 95%, up from 92% just prior to the data coming out.

Higher borrowing costs could slow economic growth and reduce oil demand.

In Europe, decades-high inflation and the impact of war in Ukraine has forced companies to impose hiring freezes and lay-offs.

In Germany, a swift economic recovery appeared less likely as data showed a surprise fall in industrial production.