Adedapo Adesanya
By Adedapo Adesanya
Oil prices broke a four-day losing spree as it rose about 1 per cent on Friday, but fell for the week on worries that strong US economic data would keep interest rates high.
Brent crude, which Nigeria prices its crude against, appreciated by 76 cents to $82.12 a barrel and the US West Texas Intermediate (WTI) crude gained 85 cents to trade at $77.72 per barrel.
Brent closed lower by 2.1 per cent for the week, its fourth consecutive weekly loss and the longest losing streak since January. But WTI depreciated by 2.8 per cent for the week.
Summer demand in the US is expected to pick up starting this weekend, and some investors are wondering if the selloff was exaggerated.
Worries over the US Federal Reserve interest rate policy and last week’s bump in US crude oil inventories weighed on market sentiment.
Minutes of the US Federal Reserve latest policy meeting released on Wednesday showed policymakers questioning whether interest rates were high enough to tame stubborn inflation.
Some officials were willing to raise borrowing costs again if inflation surged.
Meanwhile, the US Federal Reserve Chair, Mr Jerome Powell and other policymakers have since said they feel further increases are unlikely.
Higher interest rates increase the cost of borrowing, which can slow economic activity and dampen demand for oil.
Analysts from Morgan Stanley said oil demand is still robust from a broader perspective, adding that there are expectations that total oil liquids consumption to increase by about 1.5 million barrels per day this year.
Soft US gasoline (petrol) demand has been offset by global demand, which surprised to the upside, especially in the early parts of the year, the analysts said.
US gasoline product supplied, a proxy for demand, reached its highest level since November in the week to May 17, the Energy Information Administration (EIA) said on Wednesday.
On the supply side, the market is awaiting a June 2 online meeting of the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) to discuss whether to extend voluntary oil output cuts of 2.2 million barrels per day.
Analysts largely anticipate that current production cuts will be extended at least to the end of September.
Russia, in a rare admission of oil overproduction, said this week it exceeded its OPEC+ production quota in April for technical reasons.
Energy services firm Baker Hughes said oil rig count in the US, the world’s largest oil producer, an early indicator of future output, was unchanged at 497 this week.
