Oil prices inch lower from 4-mth highs as strong dollar weighs
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Investing.com– Oil prices fell slightly from four-month highs in Asian trade on Friday, seeing some profit-taking and pressure from the dollar as hotter-than-expected U.S. inflation data pushed up fears of a more hawkish Federal Reserve.
Still, crude prices were set to gain more than 4% this week, with Brent futures holding above the $85 a barrel level as signs of improving U.S. demand and tightening fuel markets spurred strong gains through the week.
Brent oil futures expiring in May fell 0.2% to $85.26 a barrel, while West Texas Intermediate crude futures fell 0.2% to $80.58 a barrel by 21:42 ET (01:42 GMT).
Prices were pressured by a stronger dollar, which rose sharply on Thursday after producer price index inflation data read stronger than expected for February. The reading, which came just days before a Fed meeting, ramped up fears that the central bank will keep interest rates higher for longer in 2024.
Oil sits on bumper weekly gains on tighter supply outlook
Brent and WTI contracts were set to add nearly 4% each this week after a bigger-than-expected draw in U.S. inventories pointed to improving demand in the world’s largest fuel consumer.
The White House was also seen buying over 3 million barrels of oil to replenish the Strategic Petroleum Reserve.
In addition to the smaller U.S. inventories, debilitating Ukrainian attacks on a key Russian fuel refinery threatened to potentially disrupt fuel supplies in parts of Asia and Europe, presenting a tighter supply outlook for oil markets.
This, coupled with continued geopolitical disruptions in the Middle East, particularly the Israel-Hamas war and the Red Sea Houthi strikes, pointed to tighter oil markets in the coming months.
Demand hopes buoyed by OPEC, IEA forecasts
Both the Organization of Petroleum Exporting Countries (OPEC) and the International Energy Administration forecast strong oil demand in 2024 and 2025, in separate monthly reports released this week.
The IEA in particular hiked its demand outlook for 2024 and said that fuel supplies were likely to tighten further, as disruptions in the Middle East continued.
But the IEA warned that slowing economic growth across the globe still presented a headwind to oil demand. The IEA’s warning also factored into concerns over higher for longer interest rates in 2024.
