Oil prices fell on Friday, a day after hitting $85 a barrel on Thursday for the first time since November. However, prices are expected to finish the week with an increase of more than 3%, as demand increases along with the US refineries completing planned revisions.
Brent crude oil futures were down 9 cents, or 0.11%, at $85.33 a barrel at 1716 GMT. West Texas Intermediate (WTI) crude oil fell 17 cents, or 0.21%, to $81.09.
Since inflation remains above the central bank’s 2 percent target, there are concerns that the US Federal Reserve will not be able to reduce interest rates. While demand increases, supply shrinks, and there is a risk of prices rising.
The reduction in interest rates is seen as an opportunity to increase demand in the USA.
Prices have been hovering between roughly $80 and $84 per barrel for most of the past month. Then on Thursday the International Energy Agency (IEA) raised its view on 2024 oil demand for the fourth time since November as Houthi attacks disrupted Red Sea shipping.
In its latest report, the IEA said world oil demand will increase by 1.3 million barrels per day in 2024, an increase of 110,000 barrels per day compared to last month. A slight supply deficit is predicted this year if OPEC+ members maintain their production cuts.
Baker Hughes said U.S. energy companies this week added the most oil and gas rigs in a week since September, and the number of oil rigs also rose to a six-month high.
The number of oil and gas rigs rose by 7 to 629 in the week to March 15, according to Baker Hughes. He said the number of oil rigs increased by six this week to 510, the highest level since September, while the number of gas rigs increased by one to 116.
This week’s gains come despite the U.S. dollar strengthening at its fastest pace in eight weeks. A stronger dollar makes crude oil more expensive for those using other currencies.
Additionally, Ukraine’s attacks on Russian oil refineries, which caused a fire at Rosneft’s largest refinery in one of the most serious attacks on Russia’s energy sector supporting prices in recent months.
U.S. crude oil inventories also fell unexpectedly last week, the Energy Information Administration (EIA) said on Wednesday, as refineries ramped up operations and gasoline inventories fell as demand increased.
Low interest rates reduce consumer borrowing costs, which can increase economic growth and demand for oil.
Some signs of slowing economic activity in the U.S. are unlikely to encourage the Fed to start cutting interest rates before June, as other data on Thursday showed a larger-than-expected rise in producer prices last month.
