Oil prices fell nearly $1 a barrel on Friday as comments that U.S. interest rates will be higher in the long term could crimp demand from the world’s largest consumers of crude oil.
Brent crude futures fell $1.09, or 1.3%, to $82.79 a barrel. WTI crude oil fell $1.00, or 1.3%, to settle at $78.26 a barrel.
For the week, Brent lost 0.2% while WTI gained 0.2%.
Dallas Federal Reserve President Lorie Logan said Friday that it is unclear whether monetary policy is tight enough to reduce inflation to the U.S. central bank’s 2 percent target.
Higher interest rates generally slow economic activity and weaken demand for oil.
While inflation is expected to slow down under current monetary policy, it is thought that this will allow the central bank to start reducing the policy rate in 2024.
The US dollar strengthened following officials’ comments, causing dollar-denominated commodities to become more expensive for buyers using other currencies. Higher U.S. interest rates for longer periods of time could also dampen demand.
Oil prices are under pressure from rising fuel stockpiles in the United States as it approaches a strong summer driving season. Given the price drop over the past month and weaker-than-expected demand trends for U.S. gasoline and diesel, some downward demand adjustment seems likely.
Next week’s US inflation data could influence the Fed’s interest rate decisions.
Oil received little support from the U.S. rig count, an indicator of future supply, despite data from Baker Hughes showing the rig count fell by three this week to 496, its lowest level since November.
Data published on Thursday showing that China imported more oil in April than in the same month last year also helped prevent the decline in oil prices. China’s exports and imports returned to growth in April after contracting compared to the previous month.
Meanwhile, the possibility that the European Central Bank will start reducing interest rates in June is increasing.
In Europe, a Ukrainian drone strike set fire to an oil refinery in Russia’s Kaluga region; It was the latest salvo from Kiev in what has become a series of tit-for-tat attacks on energy infrastructure.
Conflicts in the Middle East continue after Israeli forces shelled the southern Gaza city of Rafah on Thursday, following a lack of progress in the latest round of talks aimed at halting hostilities in Gaza.
