Ana sayfa » Oil weakens as investors weigh weak US fuel demand and profit-taking

Oil weakens as investors weigh weak US fuel demand and profit-taking

The number of oil rigs in the US reached the lowest level since December 2021

by BUNKERIST

Oil prices fell on Friday as investors weighed weak U.S. fuel demand, taking some quarter-end money off the table.

Core inflation data for May raised the possibility that the Federal Reserve will start cutting interest rates this year.

Brent crude futures for August delivery, which expired on Friday, closed at $86.41 per barrel, up 2 cents. The more liquid September contract fell 0.3% to $85 a barrel.

WTI crude oil futures fell 20 cents, or 0.24%, to $81.54.

While Brent increased by 0.02% on a weekly basis, WTI futures closed with a loss of 0.2%. Both indicators gained around 6% during the month.

According to the Energy Information Administration’s (EIA) Oil Supply Monthly report released Friday, oil production and demand in the United States rose to a four-month high in April, while gasoline demand fell to 8.83 million barrels per day, its lowest level since February.

While the EIA’s monthly report revealed that gasoline demand was quite weak, it did not inspire demand.

Some traders booked profits at the end of the second quarter after prices began rising earlier this month.

The US personal consumption expenditures (PCE) price index, the Fed’s preferred inflation indicator, remained flat in May, raising hopes for a rate cut in September. Still, the reaction in financial markets was minimal.

Rising expectations for the Fed’s expansionary cycle have led to increased risk in stock markets. Traders now price the probability of the first rate cut in September at 64%, down from 50% a month ago.

Lowering interest rates can be perceived as a blessing that increases consumer demand for oil.

Oil prices have been approaching fair value estimates lately, revealing underlying strength as the fog of war clears. It would not be a surprise to see around $90 per barrel in the coming months.

Looking at China, oil prices may not change much in the second half of 2024 as demand concerns and high supply expectations from key producers counter geopolitical risks.

According to surveys, Brent crude oil is expected to average $83.93 per barrel in 2024, and US crude oil is expected to average $79.72.

The number of active oil rigs in the U.S., an early indicator of future production, fell by six this week to 479, the lowest level since December 2021, Baker Hughes said.

The U.S. Commodity Futures Trading Commission (CFTC) said money managers increased their net long U.S. crude futures and options positions through June 25.