Investing.com — Oil prices edged lower on Friday, pressured by a stronger dollar, but still notched a second straight weekly gain amid signs of improving demand in the United States, the world’s biggest oil consumer.
At 2:30 PM ET (18:30 GMT), futures traded 0.7% lower to settle at around $80.73 per barrel, while the contract fell 0.7% to $85.24 per barrel.
A stronger dollar is weighing in, but crude oil is gaining weekly on signs of improving demand
A dollar rose on Friday after data showing services and manufacturing activity surprised on the upside in June eased expectations for rate cuts sooner rather than later.
Because oil is priced in dollars, a stronger dollar makes oil more expensive for foreign buyers who put pressure on demand.
Still, sentiment on demand continues to rise amid recent data pointing to a decline in weekly U.S. crude oil and gasoline inventories.
Data released by the U.S. oil company on Thursday showed U.S. crude inventories fell by 2.5 million barrels in the week ended June 14, more than the expected decline of 2.2 million barrels.
In addition, U.S. government data shows that total product supply, a measure of the country’s demand, rose 1.9 million barrels per day (bpd) this week to 21.1 million barrels per day.
Concerns about economic activity in the world’s largest economy have weighed on the crude oil market as the Federal Reserve keeps interest rates at high levels.
“Four-week average implied gasoline demand also continues to rise as we move deeper into the U.S. summer season, which will alleviate some concerns about gasoline demand. However, demand is still just below last year’s level,” ING analysts said in a note.
The number of drilling rigs at Baker Hughes is declining
The number of oil rigs in the US fell by 3 to 485, according to data from energy services company Baker Hughes on Friday.
The drop in rig counts, which signals drilling activity, comes at the same time the U.S. Energy Information Administration raised its forecast for U.S. crude oil production for 2024.
According to the EIA, U.S. crude oil production averages 13.24 million barrels per day this year, up from a previous estimate of 13.20 million barrels per day.
Geopolitical risk adds support
The Ukrainian military said its drones struck four oil refineries, radar stations and other military objects in Russia in the early hours of Friday.
Meanwhile, Israel continues its bombing of Gaza in its war with Hamas, a few days after Foreign Minister Israel Katz also warned of a possible “all-out war” with Lebanese Hezbollah.
The head of Hezbollah this week vowed full conflict with Israel in the event of a cross-border war and also threatened EU member Cyprus for the first time.
A confrontation between Israel and Hezbollah raises the risk of a wider conflict in this key oil-rich region, potentially disrupting global supplies.
Peter Nurse contributed to this story.
