Oil prices drifted lower on Friday amid ongoing concerns about the timing of the first interest rate cut by the US Federal Reserve (Fed), the lower demand outlook in the US, and market players' cautious steps ahead of the meeting of the Organization of Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+.
International benchmark Brent crude traded at $81.13 per barrel at 10.37 a.m. local time (0737 GMT), a fall of 0.28% from the closing price of $81.36 per barrel in the previous trading session.
The American benchmark West Texas Intermediate (WTI) traded at $76.61 per barrel at the same time, a 0.34% decrease from the previous session that closed at $76.87 per barrel.
According to analysts, positive economic data flow from the US increased the likelihood that the Fed would keep the policy rate high for longer, with expectations that it would not lower interest rates until November.
Atlanta Fed President Raphael Bostic stated they might need to be a little more patient and confident about the path of inflation to the 2% target before changing the policy rate.
“Given how high inflation was, it wouldn’t be a surprise for inflation to take several years to get down to our 2% target,” Bostic said.
The likelihood of an interest rate cut in the near future decreased, fueling demand concerns and suppressing oil prices. This is because generally, high interest rates boost the value of the US dollar, making oil more expensive for holders of other currencies.
Meanwhile, Energy Information Administration (EIA) data released late Wednesday portrayed a lower demand outlook than expected in the world's largest oil-consuming country, supporting further price decreases.
The EIA announced that US commercial crude oil inventories increased by 1.8 million barrels during the week ending May 17. The agency indicated an inventory build-up that significantly outpaced market projections, indicating a decline in US demand of almost 2.4 million barrels.
Nevertheless, expectations that the OPEC+ group will decide to continue with voluntary crude oil supply cuts at the June 1 meeting continue to put upward pressure on oil prices.
By Duygu Alhan
Anadolu Agency
energy@aa.com.tr