Oil prices were set for third straight weekly increases during the week ending June 28 amid global supply concerns triggered by ongoing conflicts in the Middle East and the Russia-Ukraine war and growing expectations that the US Federal Reserve (Fed) will soon start cutting interest rates.
International benchmark Brent crude traded at $85.59 per barrel at 4.10 p.m. local time (1310 GMT) on Friday, rising by around 0.4% relative to the closing price of $85.24 a barrel on Friday last week.
West Texas Intermediate (WTI), the American benchmark, traded at $82.14 a barrel at the same time on Friday, an increase of about 1.7% from last Friday's session, which closed at $80.73 per barrel.
Both benchmarks started the week on a positive note oversupply worries due to the growing tensions in the Middle East.
In recent weeks, the Israeli-Lebanese border has seen significant escalation, prompting repeated calls from the US to contain the situation.
The escalating geopolitical tensions continue to risk global energy supply routes and drive up oil prices.
Tensions have soared along Lebanon's border with Israel amid cross-border attacks between the Lebanese Hezbollah group and Israeli forces as Tel Aviv presses ahead with its deadly offensive on the Gaza Strip, which has killed more than 37,700 Palestinians since last October.
However, ongoing uncertainties over the timing of the Fed's interest rate cut continue to raise demand concerns, limiting upward price pressures.
Fed Board Member Michelle Bowman said Tuesday that reducing the Fed's policy rate too soon or quickly could result in a rebound in inflation, which in turn would require further policy rate increases in the future to return inflation to the central bank's 2% target in the long run.
Experts believe that keeping interest rates at high levels for a sustained period may pose risks to the oil demand outlook.
US commercial crude oil inventories increased by 0.8%, or about 3.6 million barrels, to 460.7 million barrels during the week ending June 21, the Energy Information Administration announced on Thursday. The market expectation was for stocks to decrease by about 2.6 million barrels.
Over the same period, gasoline inventories rose by approximately 2.7 million barrels to 233.9 million barrels.
Despite the summer period, when oil demand is typically high, data indicating an increase in US crude oil inventories raised demand concerns and supported lower oil prices.
However, prices again increased on Friday following growing global supply concerns triggered by ongoing conflicts in the Middle East and the Russia-Ukraine war. Prices were also buoyed by growing expectations that the Fed will soon start cutting interest rates.
Meanwhile, according to Commerce Department figures released Friday, the Fed's preferred inflation indicator softened in May on both annual and monthly basis.
The core personal consumption expenditures (PCE) price index monthly rose 2.6% in May, down from the 2.8% year-on-year gain in April, and came in line with market expectations.
The slowing figures indicate that inflation is decelerating in the world's biggest economy, and the Fed could start lowering interest rates as early as September.
The Fed has made a total of 11 interest rate increases between March 2022 and July 2023 to tame the record inflation, bringing the federal funds rate to the 5.25%-5.5% target range – the highest in 22 years.
The central bank skipped four rate hikes last year, and four more this year, while its first rate cut is widely expected to happen in the second half of this year. Easing interest rates could be a boon for oil as it could increase demand.
By Firdevs Yuksel
Anadolu Agency
energy@aa.com.tr