Oil suffers weekly loss on stronger US dollar, record-high Fed rates; Brent sticks to $82/bbl

International crude oil prices fell by nearly $1 a barrel in the previous session as comments from US central bank officials indicated higher-for-longer interest rates, which could hinder demand from the world’s largest crude consumers. Dallas Federal Reserve President Lorie Logan said that it was unclear whether monetary policy was tight enough to bring down inflation to the US Federal Reserve’s two per cent target. This weighed on the movement on crude prices.

Brent crude futures settled at $82.79 a barrel, down $1.09, or 1.3 per cent. US West Texas Intermediate crude settled at $78.26 a barrel, down $1.00, or 1.3 per cent. For the week, Brent logged a 0.2 per cent loss, while WTI recorded a rise of 0.2 per cent. Higher interest rates typically slow down the economic activity and weaken oil demand.

Also Read: Oil rises 1% to hit 1-week high on rising demand optimism in China, US; Brent nears $84/bbl

What’s weighing on crude oil prices?

-Atlanta Fed President Raphael Bostic also told Reuters he thought inflation was likely to slow under current monetary policy, enabling the central bank to begin reducing its policy rate in 2024 – though perhaps by only a quarter of a percentage point and not until the final months of the year.

-The US dollar strengthened after the Fed officials’ comments, making the greenback-denominated commodities more expensive for buyers using other currencies. Higher-for-longer US interest rates could also dampen demand.

-Oil prices were also under pressure from the rising US crude oil inventories approaching the typically robust summer driving season. Analysts said that given the price decline of the past month and the weak demand trends for US gasoline and diesel, some bearish demand adjustment would appear likely.

Also Read: Brent may hit $95/bbl in near-term, Q2FY25 target price raised by $5/bbl on geopolitical risk premium: ICICI Bank

-Oil drew little support from the US oil rig count, which is an indicator of future supply, despite energy services firm Baker Hughes data showing the number of oil rigs fell by three to 496 this week, their lowest since November.

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

-The European Central Bank, meanwhile, looks increasingly likely to start cutting rates in June. In Europe, a Ukrainian drone attack set an oil refinery in Russia’s Kaluga region on fire on Friday, the latest from Kyiv in what has been seen as a series of tit-for-tat attacks on energy infrastructure.

-The conflict in the Middle East also continues after Israeli forces bombed areas of the southern Gaza city of Rafah on Thursday, according to Palestinian residents, after a lack of progress in the latest round of negotiations to halt hostilities in Gaza, according to news agency Reuters.