By Arathy Somasekhar
HOUSTON (Reuters) -Oil prices rose about 1% on Friday but fell during the week on concerns that strong U.S. economic data would keep interest rates high for an extended period, reducing fuel demand.
The July contract rose 76 cents to $82.12 a barrel. The more active August contract closed 73 cents higher at $81.84.
U.S. West Texas Intermediate (WTI) crude futures fell 85 cents, or 1.1%, higher to $77.72.
On Thursday, Brent closed at its weakest level since February 7 and US WTI futures closed at its lowest level since February 23.
Summer demand in the United States is expected to pick up starting this weekend, and some investors are wondering whether the sell-off was overdone, said Dennis Kissler, senior vice president of trading at BOK Financial.
Brent closed 2.1% lower this week. It fell for four consecutive sessions this week, the longest losing streak since January 2. WTI fell 2.8% this week.
Concerns about the Federal Reserve’s interest rate policy and last week’s surge in U.S. crude inventories weighed on market sentiment, said Tim Evans, an independent energy analyst.
Minutes from the Fed’s latest policy meeting released Wednesday show policymakers are questioning whether interest rates are high enough to curb persistent inflation. Some officials were prepared to raise borrowing costs again if inflation rose sharply.
Fed Chairman Jerome Powell and other policymakers have since said further increases are unlikely.
Higher interest rates increase borrowing costs, which can slow economic activity and dampen oil demand.
Consumer confidence also fell to the lowest level in five months on growing fears that borrowing costs would remain high. At first glance, pessimism among households would imply slower consumer spending, although the relationship between the two is weak.
Oil demand remains robust from a broader perspective, Morgan Stanley analysts wrote in a note. They added that they expect total liquid oil consumption to increase by about 1.5 million barrels per day this year.
Weak gasoline demand in the US was offset by global demand, which surprised on the upside, especially in the early parts of the year, the analysts said.
Supply of US petrol products, a measure of demand, reached the highest level since November in the week to May 17, the Energy Information Administration (EIA) said on Wednesday.
On the supply side, the number of drilling rigs, an early indicator of future production, was unchanged this week at 497, according to energy services company Baker Hughes.
Meanwhile, the market is awaiting an online meeting on June 2 of the OPEC+ producer group, made up of the Organization of the Petroleum Exporting Countries and its allies, to discuss whether to extend voluntary oil production cuts of 2.2 million barrels per day.
Analysts largely expect current production cuts to be extended at least until the end of September.
Russia, in a rare acknowledgment of oil overproduction, this week exceeded its April OPEC+ production quota for “technical reasons,” a surprise that analysts and industry sources say highlights Moscow’s challenges in reducing oil production.
Venezuela aims to produce 1.23 million barrels of oil per day in December, up about 290,000 barrels per day from the start of the year, after adding oil rigs, Oil Minister Pedro Tellechea said.
Money managers increased their net long futures and options positions in the week to May 21, the US Commodity Futures Trading Commission (CFTC) said on Friday.