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Oil Prices Dip But Set For Weekly Gain Amid Market Assessments
Oil prices declined on Friday but were poised to secure their first weekly gain in four weeks as markets weighed the implications of sustained higher U.S. interest rates against favorable projections for crude and fuel demand this year. Brent crude futures dropped by 72 cents, or 0.87%, to $82.04 a barrel by 0100 GMT. Similarly, West Texas Intermediate (WTI) U.S. crude futures decreased by 79 cents, or 1%, to $77.84 a barrel, reversing modest gains from the previous session.
The week witnessed fluctuations in oil prices, with a rally induced by the Organization of Petroleum Exporting Countries' (OPEC) decision to uphold a forecast for robust global oil demand growth in 2024. This optimistic outlook was further supported by Goldman Sachs' projection of strong U.S. fuel demand for the summer. Such reassurances helped counterbalance losses from the previous week, which were influenced by an agreement among OPEC and its allies, collectively known as OPEC+, to begin unwinding output cuts post-September.
Adding to the market's buoyancy, Russia committed to adhering to its output obligations under the OPEC+ agreement after reporting that it surpassed its quota in May. Analysts at ANZ noted that stricter compliance with current quotas should more than compensate for any potential increases from a group of eight producers phasing out their voluntary cuts. They projected that this compliance would keep the crude oil market well-supported over the next 18 months.
However, prices fell after the U.S. Federal Reserve decided to maintain steady interest rates and postponed the commencement of rate cuts until potentially December. This stance, combined with comments from Fed officials, sparked concerns about a slowdown in economic growth and a subsequent dip in fuel demand.
Market participants are also keenly awaiting a series of inventory reports due on Friday from China, the world's second-largest oil consumer. According to ANZ analysts, these reports are expected to provide insights into any potential weaknesses in energy and metal demand.
