Investing.com — Oil prices settled higher on Friday, but that didn’t prevent heavy weekly losses Friday as concerns about stubborn inflation and high interest rates raised doubts that demand will remain robust this year.
At 14:30ET (18:30 GMT), it rose 1% to $82.14 a barrel, but posted losses of around 2% during the week. Although the stock rose 1.1% to $77.74 per barrel, it still fell to a loss of more than 2% for the week.
Oil is heading for weekly losses as interest rate fluctuations weigh more heavily
Both contracts are expected to lose around 4% this week, with Brent at its weakest level in two months and WTI at its lowest level in three months. The pressure mainly comes from concerns about persistent US inflation and the possibility that interest rates will remain high for a long time.
A series of signals from the Federal Reserve reflected increased fears among policymakers that inflation will slowly reach the central bank’s 2% annual target – a scenario expected to prompt the central bank to keep interest rates high.
Analysts at Goldman Sachs have pushed back on expecting the Federal Reserve to cut rates this year, citing comments from central bank officials this week calling for more evidence that inflation in the world’s largest economy is cooling sustainably toward the target of 2%.
In a note to clients, Goldman Sachs analysts said on Friday that they now do not expect the Fed to make a rate cut until September. They had previously estimated that the cut – the first since the Fed began a steep series of policy tightenings in 2022 – would come in July.
The tool now shows an almost equal probability of a cut or a hold in September.
Baker Hughes rig unchanged
Oilfield services company Baker Hughes reported Friday that its weekly U.S. oil rigs were unchanged at 497. The continued lull in drilling activity has not done much to boost domestic production, which remains near record highs at 13.1 million barrels per day. That’s above last year’s average of 12.936 million barrels per day.
In a trend that has fueled fears of non-OPOC-led oversupply, the US has led global oil production for six years in a row. OPEC and its allies, OPEC+, have tried to curb global supply through agreements aimed at limiting member states’ production.
OPEC+ meeting in focus for more supply clues
Markets were now looking forward to a meeting of the Organization of the Petroleum Exporting Countries and Allies (OPEC+), which will take place in early June.
Much of the focus will be on whether the cartel will extend voluntary production cuts totaling about 2.2 million barrels per day beyond the end-June deadline.
These voluntary cuts from the cartel of major producers are in addition to previous cuts of 3.66 million barrels per day announced in stages since the end of 2022 and valid until the end of 2024.
The total committed cuts are therefore currently 5.86 million barrels per day, equivalent to approximately 5.7% of daily global demand.
But how tight markets will be this year remains uncertain, especially as production remained at record levels.
Some easing tensions in the Middle East also pointed to fewer crude oil supply disruptions, while U.S. oil demand is expected to pick up in coming weeks due to the busy summer season. The Memorial Day weekend holiday usually marks the start of the season, with gasoline demand already increasing in the world’s largest fuel consumer.
(Peter Nurse, Ambar Warrick contributed to this article.)
