Oil braces for weekly losses as markets worry about demand, ET Auto

Oil prices rose on Friday but looked poised for a weekly loss on lingering fears that sticky inflation could push interest rates higher for longer and dampen demand for the fuel.

Brent crude for July was up 74 cents at $81.85 a barrel as of 11:53 a.m. ET (1553 GMT). The more active August contract rose 28 cents to $81.39.

U.S. West Texas Intermediate (WTI) crude futures rose 84 cents to $77.71.

On Thursday, Brent closed the weakest since Feb. 7 and U.S. WTI futures closed at their lowest since Feb. 23.

Brent was on course to close up 2.2% this week. It has fallen for four straight sessions this week, its longest losing streak since January 2. WTI was set to close down 2.9% this week.

“Oil prices remain weak in early trading on Friday, with concerns about Federal Reserve interest rate policy and last week’s rise in US crude inventories still weighing on market sentiment,” said Tim Evans, an independent energy analyst.

Minutes of the Fed’s latest policy meeting, released Wednesday, showed policymakers questioning whether interest rates are high enough to control stubborn inflation. Some officials have been willing to raise borrowing costs again if inflation picks up.

Fed Chairman Jerome Powell and other policymakers have since said they believe further hikes are unlikely.

Higher interest rates increase the cost of borrowing, which can slow economic activity and reduce demand for oil.

“Macroeconomic developments have failed to provide significant support for oil,” said PVM analyst Tamas Varga. “It’s a fair bet that rate cuts are coming down.”

The market is awaiting a June 2 online meeting of the OPEC+ producer group, which comprises the Organization of the Petroleum Exporting Countries and its allies, to discuss whether to extend the voluntary oil production cut of 2.2 million barrels per day.

Analysts widely expect the current production cuts to be extended at least until the end of September.

Russia, in a rare admission of oil overproduction, said this week it exceeded its OPEC+ production quota in April for “technical reasons,” a surprise that analysts and industry sources say shows Moscow’s challenges in cutting production .

“After the OPEC+ meeting, it is likely that the market will focus on demand again. The upcoming Memorial Day weekend marks the start of the summer driving season in the US,” said Commerzbank analyst Barbara Lambrecht.

U.S. gasoline supplies, a gauge of demand, hit their highest level since November in the week to May 17, the Energy Information Administration (EIA) said on Wednesday.

Meanwhile, the dollar was set for its biggest weekly gain in a month and a half on Friday, making dollar-denominated crude more expensive for foreign buyers.