TOKYO : Oil prices were little changed this morning but are set for their second weekly drop as disappointing economic data from the U.S., the world’s biggest crude user, and uncertainty on further interest rate hikes raised concerns about future fuel demand.
Brent crude futures for June were trading at $78.53 a barrel, up 16 cents, or 0.2 per cent, early this morning.
That contract expires today and the more active July contract was up 21 cents, or 0.3 per cent at 78.43 a barrel.
U.S. West Texas Intermediate (WTI) crude was up 23 cents, or 0.3 per cent, at $74.99 a barrel.
Brent is set to decline this week by 3.8 per cent and is down 9.1 per cent in the past two weeks. WTI is on a path to drop 3.8 per cent this week, taking its two-week decline to 9.4 per cent.
U.S. economic growth slowed more than expected in the first quarter, although jobless claims fell in the week ending April 22, data showed.
Investors are also worried about potential interest rate hikes by inflation-fighting central banks could slow economic growth and dent energy demand in the United States, Britain and the European Union.
The U.S. Federal Reserve, the Bank of England and the European Central Bank are all expected to raise rates at their coming meetings. The Fed meets over May 2-3.
Oil investors are waiting for the Fed and other central banks to move next week to see the future direction of interest rates and the global economy, said Satoru Yoshida, a commodity analyst at Rakuten Securities.
“The market is quiet due to a mixture of bullish and bearish economic data and as a recovery in the global equity market gave a relief to investors,” referring to oil’s slight rebound on Thursday.
U.S. stocks closed higher on Thursday as strong earnings helped investors look past signs of economic weakness.
On the supply side, Russian Deputy Prime Minister Alexander Novak said on Thursday the OPEC+ group saw no need for further output cuts despite lower-than-expected Chinese demand, but that the organisation can always adjust policy if necessary.
The Organization of the Petroleum Exporting Countries (OPEC) and its allies including Russia, known as OPEC+, this month announced a combined output reduction of around 1.16 million barrels per day, which sent oil prices higher.
The market rallied following the OPEC+ announcement, but has weakened in response to concerns about recession and the impact that would have on demand.
Earlier this week, Energy Information Administration data showed that U.S. crude oil and gasoline inventories fell more than expected last week, as demand for the motor fuel picked up ahead of the peak summer driving season.
“Given a warning from Russia that the OPEC+ could adjust policy if needed and a bigger-than-expected drop in U.S. oil inventories ahead of the driving season, oil prices will likely move higher in the coming week,” he said, predicting WTI to head toward $80 a barrel.
Source: Reuters
