May 24 2024: Oil prices remained stable on Friday as investors balanced concerns about U.S. Federal Reserve comments on interest rates amid persistent inflation against signs of strengthening seasonal U.S. fuel demand.
By 0640 GMT, Brent crude futures had risen 5 cents to $81.41 a barrel, while U.S. West Texas Intermediate (WTI) crude futures were up 2 cents at $76.89.
Both benchmarks had settled at multi-month lows on Thursday, with Brent crude futures closing at their weakest since February and U.S. crude futures hitting a three-month low.
Brent futures were heading for a weekly decline of more than 3%, and WTI futures were poised for nearly a 4% slide from last week, as ongoing U.S. macroeconomic constraints affected prices.
“The backdrop of ‘possibly higher-for-longer rates’ weighed significantly on oil prices this week,” said Priyanka Sachdeva, a senior market analyst at Phillip Nova.
Minutes from the Fed’s latest policy meeting released on Wednesday showed policymakers questioning whether current interest rates are high enough to curb stubborn inflation. Some officials expressed willingness to hike borrowing costs again if inflation surged. However, Fed Chair Jerome Powell and other policymakers have indicated that further rate hikes are unlikely.
Higher rates could slow economic growth and reduce fuel demand.
Meanwhile, strengthening U.S. gasoline demand was helping stabilize prices ahead of the Memorial Day holiday weekend, which marks the start of the U.S. summer driving season.
Gasoline demand in the U.S. reached its highest level since November, according to the Energy Information Administration (EIA) on Wednesday. This supported the market, as U.S. drivers account for around a tenth of global oil demand, “making the upcoming driving season a pillar of the recovery in global demand growth,” ANZ analysts said in a note.
All eyes are now on the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, and their meeting on June 1 to discuss 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,” the ANZ analysts added.
(This story has been corrected to clarify that Brent closed at their weakest since February, not January, in paragraph 3)
