Oil set for weekly loss as markets worry about demand
Oil prices rose on concerns of high interest rates impacting fuel demand. Federal Reserve's interest rate policy, US crude oil inventories, and statements from Fed Chair Jerome Powell influenced market sentiment. Analysts anticipate market shifts as OPEC+ considers extending production cuts and reports emerge of oil overproduction by Russia.
It declined for four straight session this week, its longest losing streak since Jan 2. WTI was set to close down 2.9% for the week.
"Petroleum prices remain soft in early Friday dealings, with worries over Federal Reserve interest rate policy and last week's bump in US crude oil inventories still weighing on market sentiment," said Tim Evans, an independent energy analyst.
Minutes of the Fed 's latest policy meeting released on Wednesday showed policymakers questioning whether interest rates were high enough to tame stubborn inflation.
Some officials were willing to raise borrowing costs again if inflation surged.
Fed Chair Jerome Powell and other policymakers have since said they feel further increases are unlikely.
Higher interest rates increase the cost of borrowing, which can slow economic activity and dampen demand for oil. "Macroeconomic developments have been failing to provide meaningful support for oil," PVM analyst Tamas Varga said.
"It is a fair bet that rate cuts are slipping away.
" The market is awaiting a June 2 online meeting of the OPEC+ producer group comprising the Organization of the Petroleum Exporting Countries and its allies to discuss whether to extend voluntary oil output cuts of 2.2 million barrels per day. Analysts largely anticipate that current production cuts will be extended at least to 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 curbing output.
"After the OPEC+ meeting, the market is likely to increasingly focus on demand again.
The upcoming Memorial Day weekend marks the start of the summer driving season in the U.S.," said Commerzbank analyst Barbara Lambrecht.
U.S. gasoline product supplied, a proxy for demand, reached its 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 largest weekly rise in a month-and-a-half on Friday, making dollar-denominated crude more expensive for foreign buyers.
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