Oil prices remained stable on Friday as investors considered the latest comments from the U.S. Federal Reserve on interest rates amid sticky inflation, while signs of firming seasonal U.S. fuel demand lent support.
Brent crude futures, the international benchmark, saw a marginal increase of 5 cents to reach $81.41 a barrel by 0640 GMT, while U.S. West Texas Intermediate (WTI) crude futures edged up 2 cents to $76.89.
The stability in oil prices followed a recent downtrend, with both benchmarks settling at multi-month lows on Thursday. Brent crude futures closed at their weakest since January, while U.S. crude futures hit a three-month low.
For the week, Brent futures were on track for a decline of more than 3%, and WTI futures were poised for a slide of nearly 4% from the previous week, reflecting ongoing macroeconomic constraints in the U.S. that kept oil prices under pressure.
“The backdrop of ‘possibly higher-for-longer rates’ weighed significantly on oil prices this week,” noted Priyanka Sachdeva, a senior market analyst at Phillip Nova.
The minutes released on Wednesday from the Fed’s latest policy meeting revealed discussions among policymakers regarding the adequacy of current interest rates in addressing persistent inflation. While some officials expressed readiness to raise borrowing costs further if inflation surged, Fed Chair Jerome Powell and others indicated that additional rate hikes were unlikely.
The possibility of higher interest rates has raised concerns about potentially slowing economic growth and dampening fuel demand.
On the positive side, strengthening U.S. gasoline demand helped stabilize prices ahead of the Memorial Day holiday weekend, which marks the beginning of the U.S. summer driving season. The Energy Information Administration (EIA) reported that gasoline demand in the U.S. had reached its highest level since November, providing support to the market.
Looking ahead, all eyes are on the upcoming meeting of the Organization of the Petroleum Exporting Countries (OPEC) and its allies, collectively known as OPEC+, scheduled for June 1. The meeting will address the question of whether to extend voluntary oil output cuts of 2.2 million barrels per day.
“The market is also tentative about taking an aggressive positioning ahead of next week’s OPEC meeting, where supply policy will be discussed,” commented analysts from ANZ.
With these factors in mind, oil market participants remain cautious as they await further developments regarding interest rates, fuel demand trends, and OPEC’s supply decisions. The evolving macroeconomic landscape and geopolitical dynamics continue to influence oil prices, highlighting the importance of monitoring global economic indicators and geopolitical events for oil market participants.