Oil prices steadied on Friday but were on track for significant weekly losses due to concerns over persistent inflation and high interest rates, which cast doubts on robust demand for the year.
Brent oil futures for July delivery fell 0.1% to $81.31 a barrel, while West Texas Intermediate (WTI) crude futures also dropped 0.1% to $76.81 a barrel by 21:02 ET (01:02 GMT). Brent reached its weakest level in two months, while WTI hit a three-month low.
Both contracts were set to lose over 4% this week, pressured mainly by concerns over stubborn U.S. inflation and the likelihood of prolonged high interest rates. Signals from the Federal Reserve indicated increasing anxiety among policymakers that inflation would be slow to reach the central bank’s 2% target, potentially leading to sustained high rates or even additional hikes.
This sentiment boosted the dollar, adding pressure to oil markets and raising concerns that high rates could stymie economic growth, thus keeping oil demand subdued. However, U.S. oil demand is expected to pick up with the travel-heavy summer season starting with the Memorial Day weekend, traditionally marking an increase in gasoline consumption in the world's biggest fuel consumer.
Attention now turns to the OPEC+ meeting on June 1, where markets will be looking for cues on whether the cartel will extend its production cuts beyond the end of June. Any extension is expected to boost crude prices due to the prospect of tighter markets, although record-high U.S. crude production and easing Middle East tensions could moderate these effects.
Brent oil futures for July delivery fell 0.1% to $81.31 a barrel, while West Texas Intermediate (WTI) crude futures also dropped 0.1% to $76.81 a barrel by 21:02 ET (01:02 GMT). Brent reached its weakest level in two months, while WTI hit a three-month low.
Both contracts were set to lose over 4% this week, pressured mainly by concerns over stubborn U.S. inflation and the likelihood of prolonged high interest rates. Signals from the Federal Reserve indicated increasing anxiety among policymakers that inflation would be slow to reach the central bank’s 2% target, potentially leading to sustained high rates or even additional hikes.
This sentiment boosted the dollar, adding pressure to oil markets and raising concerns that high rates could stymie economic growth, thus keeping oil demand subdued. However, U.S. oil demand is expected to pick up with the travel-heavy summer season starting with the Memorial Day weekend, traditionally marking an increase in gasoline consumption in the world's biggest fuel consumer.
Attention now turns to the OPEC+ meeting on June 1, where markets will be looking for cues on whether the cartel will extend its production cuts beyond the end of June. Any extension is expected to boost crude prices due to the prospect of tighter markets, although record-high U.S. crude production and easing Middle East tensions could moderate these effects.
