Home Oil and Gas Oil prices hold near 7-week high on signs of improving US demand

Oil prices hold near 7-week high on signs of improving US demand

by Business News Report

Crude oil prices held near a seven-week high on Friday as the market balanced signs of improving U.S. demand and falling oil and fuel inventories versus a stronger U.S. dollar. Brent futures rose 4 cents, or 0.1%, to $85.75 a barrel, while U.S. West Texas Intermediate (WTI) crude for August delivery remained unchanged at $81.29 from where it closed on Thursday. That put Brent on track for its highest close since April 30 for a second day in a row. WTI, meanwhile, closed at $82.17 a barrel on Thursday, its highest since April 29 when the higher-priced July contract was still the front-month. For the week, both crude benchmarks were up about 4% for a second week in a row. 

A stronger U.S. dollar  helped keep oil prices in check. The dollar rose to a seven-week high versus a basket of other currencies with the U.S. Federal Reserve’s (Fed) patient approach to cutting interest rates contrasting with more dovish stances elsewhere.  The Fed hiked interest rates aggressively in 2022 and 2023 to tame a surge in inflation. Those higher rates boosted borrowing costs for consumers and businesses, which can slow economic growth and reduce demand for oil. Similarly, a stronger U.S. dollar can reduce demand for oil by making dollar-denominated commodities like oil more expensive for holders of other currencies. 

In the U.S., the world’s biggest oil consumer, business activity crept up to a 26-month high in June amid a rebound in employment, but price pressures subsided considerably, offering hope that a recent slowdown in inflation was likely to be sustained. U.S. data from the Energy Information Administration, meanwhile, showed total product supplied, a proxy for oil demand, rose by 1.9 million barrels per day (bpd) in the week ending June 14 to 21.1 million bpd.

“The seasonal demand increase, as shown by the latest EIA data, renewed confrontation between Israel and Hezbollah, and the hurricane season could sustain price strength into the summer,” Citi analysts said in a note. In India, refiners processed nearly 1.3% more crude oil in May than a year earlier, provisional government data showed, while the share of Russian supplies in imports to the world’s third biggest oil consumer increased. “Signs of stronger demand in Asia also boosted sentiment. Oil refineries across the region are bringing back some idled capacity after maintenance,” analysts at ANZ Research said. But in the Euro zone, business growth slowed sharply this month as demand fell for the first time since February. In China, the world’s second biggest oil consumer, Beijing warned that escalating frictions with the European Union (EU) over electric vehicle imports could trigger a trade war. Meanwhile, Ukraine’s military said its drones struck four oil refineries, radar stations and other military objects in Russia. The head of Lebanon’s Hezbollah this week pledged a full-on conflict with Israel in the event of a cross-border war and also threatened EU member Cyprus for the first time.

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