Investing.com– Oil prices steadied on Friday, but were headed for steep weekly losses as concerns over sticky inflation and high interest rates spurred doubts that demand will remain robust this year.
Brent oil futures expiring in July fell 0.1 to $81.31 a barrel, while West Texas Intermediate crude futures fell 0.1% to $76.81 a barrel by 21:02 ET (01:02 GMT). Brent was at its weakest level in two months, while WTI was at a three-month low.
Oil heads for weekly losses as rate jitters weigh
Both contracts were set to lose over 4% this week, with pressure coming chiefly from concerns over sticky U.S. inflation and high for longer interest rates.
A string of signals from the Federal Reserve reflected increased anxiety among policymakers that inflation will be slow in reaching the central bank’s 2% annual target- a scenario that is expected to push the bank into keeping rates high.
Some policymakers were even seen raising the possibility of more rate hikes to quell stubborn inflation. This saw traders sharply pare bets on a rate cut in September, with the CME Fedwatch tool now showing a nearly equal probability of a cut or a hold.
This notion boosted the dollar, which pressured oil markets. It also factored into concerns that pressure from high rates will stymie economic growth in the coming months, keeping oil demand subdued.
Still, U.S. oil demand is expected to pick up in the coming weeks with the travel-heavy summer season. The Memorial Day weekend holiday usually marks the beginning of the season, with gasoline demand already seen picking up in the world’s biggest fuel consumer.
OPEC+ meeting in focus for more supply cues
Markets were now looking to a meeting of the Organization of Petroleum Exporting Countries and allies (OPEC+), which is set for June 1.
Focus will be largely on whether the cartel will extend its current run of production cuts past an end-June deadline. Any further extension in production cuts is expected to boost crude prices with the prospect of tighter markets.
But just how tight markets will be this year remains uncertain, especially as U.S. crude production remained at record highs.
Some easing tensions in the Middle East also pointed to fewer supply disruptions for crude.
