Adedapo Adesanya
By Adedapo Adesanya
Oil prices settled lower on Friday, posting a weekly decline as traders worried interest rate hikes could sap demand.
Brent crude closed downward by 29 cents or 0.4 per cent to $73.85 a barrel, while the US West Texas Intermediate (WTI) crude fell by 35 cents or 0.5 per cent to $69.16 per barrel.
On Thursday, Brent dropped about $3 a barrel after the Bank of England raised interest rates by a bigger-than-expected half a percentage point.
There were more worries as central banks in Norway and Switzerland also hiked rates.
The benchmarks declined more than 3.5 per cent for the week.
It also looks like the world’s largest economy, the US, could see further interest rate hikes as San Francisco Federal Reserve Bank President Mary Daly said two hinted that more rate hikes this year were a very reasonable projection.
The talks of higher interest rates mean increased borrowing costs for businesses and consumers could slow economic growth and reduce oil demand.
Prices were also pressured by a rise in the value of the US Dollar. This pressured oil prices by making the commodity more expensive for other currency holders.
Also, US business activity also fell to a three-month low in June as services growth eased for the first time this year and the contraction in the manufacturing sector deepened, survey data showed.
Weakening Chinese data also added to worries as the economic recovery has faltered over several months, with consumption, production, and property market numbers coming in lower than expected.
This week’s US inventory report from the Energy Information Administration (EIA) showed crude stocks posted a surprise decline of 3.8 million barrels.
Also set to tighten the market is Saudi Arabia’s production cut of 1 million barrels per day that will start in July, which was announced along with an Organisation of the Petroleum Exporting Countries and its allies, OPEC+ deal to limit supplies into 2024.
US energy firms this week cut the number of oil rigs operating for an eighth week in a row; energy services firm Baker Hughes Co said the US oil rig count, an indicator of future output, fell 6 to 546 this week, the lowest since April 2022.
