By Scott DiSavino
(Reuters) -Crude oil prices fell about 1% on Friday on concerns that growth in global oil demand could be hit by a strong U.S. dollar and negative economic news from some parts of the world.
Prices fell despite signs of improving US oil demand and falling fuel inventories that helped push crude prices to a seven-week high a day earlier.
futures fell 47 cents, or 0.6%, to settle at $85.24 a barrel, while U.S. West Texas Intermediate crude (WTI) ended 56 cents, or 0.7%, lower at $80.73.
The decline pushed WTI out of technically overbought territory for the first time in four days, while Brent futures remained overbought for the fourth day in a row for the first time since early April.
Both crude oil benchmarks rose about 3% this week after rising about 4% last week.
The US dollar rose to a seven-week high against a basket of other currencies, with the Federal Reserve’s patient approach to cutting rates contrasting with a more dovish stance elsewhere.
The Fed aggressively raised rates in 2022 and 2023 to curb the rise in inflation. Higher interest rates pushed up borrowing costs for consumers and businesses, which could slow economic growth and reduce demand for oil.
A stronger U.S. dollar could also reduce demand for oil by making dollar-denominated commodities like oil more expensive for holders of other currencies.
In the world’s largest oil consumer, U.S. business activity rose to a 26-month high in June as employment recovered but price pressures eased significantly, offering hope that a recent slowdown in inflation was likely to persist.
However, sales of existing homes in the U.S. fell for a third straight month in May as record high prices and a rebound in mortgage rates sidelined potential buyers.
Data from the U.S. Energy Information Administration showed Thursday that total product supply, a measure of oil demand, rose 1.9 million barrels per day last week to 21.1 million barrels per day.
Despite the drop in crude oil prices, U.S. gasoline futures rose for a fourth day to a one-month high, reflecting rising demand during the summer driving season and a drop in inventories.
MIXED GLOBAL DEMAND SIGNALS
In India, refineries processed nearly 1.3% more in May than a year earlier, preliminary government data showed, while the share of Russian supply in imports to India, the world’s third-largest oil consumer, rose.
“Signs of stronger demand in Asia have also boosted sentiment, with oil refineries across the region bringing back some unused capacity after maintenance,” ANZ Research analysts said.
But in the euro zone, business growth slowed sharply this month as demand fell for the first time since February.
In China, the world’s second-largest oil consumer, Beijing warned that escalating conflicts with the European Union over electric vehicle imports could trigger a trade war.
Geopolitical tensions contributed to the mixed picture.
The Ukrainian military said its drones hit four oil refineries, radar stations and other military objects in Russia.
The head of Lebanese 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.
In Ecuador, state oil company Petroecuador has declared force majeure on the supply of Napo heavy crude oil for export following the closure of a key pipeline and oil wells due to heavy rains.
