Crude oil prices fell on weakening prospects for a US interest rate cut

By Adedapo Adesanya

Crude oil prices fell on Friday as comments from U.S. central bank officials pointed to higher interest rates for longer, which could curb demand in the world’s biggest crude consumers.

Brent crude futures settled at $82.79 a barrel after falling $1.09, or 1.3%, and U.S. West Texas Intermediate (WTI) crude futures settled at $78.26 a barrel, after falling $1.00 or 1.3%.

For the week, Brent lost 0.2%, while WTI gained 0.2%.

Oil prices were pressured as the US dollar strengthened after Dallas Federal Reserve President Lorie Logan said it was unclear whether policy was tight enough to reduce inflation to the US central bank’s 2 percent target.

A strong dollar makes dollar-denominated goods more expensive for buyers using other currencies, and higher longer-term U.S. interest rates could dampen demand.

Higher interest rates typically slow economic activity and weaken demand for oil.

Atlanta Federal Reserve President Raphael Bostic also told Reuters he believed inflation could slow under current monetary policy, allowing the central bank to begin cutting its policy rate in 2024 – though it may by just a quarter of a percentage point and no. until the last months of the year.

Market analysts also noted that prices were under pressure from rising US fuel stockpiles heading into the usually robust summer season.

The market will also keep an eye on US inflation data that could influence the central bank’s interest rate decisions.

Prices received little support from U.S. oil rigs, an indicator of future supply, despite data from energy services firm Baker Hughes showing oil rigs fell three to 496 this week, the lowest level from November.

Data on Thursday showing that China imported more oil in April than in the same month last year also helped keep oil prices from falling. China’s exports and imports returned to growth in April after contracting the previous month.

Meanwhile, the European Central Bank (ECB) looks increasingly likely to start cutting interest rates in June.

The conflict in the Middle East also continues after Israeli forces shelled areas of the southern Gaza city of Rafah on Thursday, according to Palestinian residents, following a lack of progress in the latest round of negotiations to end hostilities in Gaza.

In Europe, a Ukrainian drone strike set fire to an oil refinery in Russia’s Kaluga region, in what has become a series of attacks between countries on energy infrastructure.

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