Oil prices faltered on Friday, losing almost 3% to hit a weekly drop following the Federal Reserve’s two-month delay suggestion on cutting interest rates.
Brent crude oil futures fell 2.50% to $81.62 per barrel, while the US West Texas Intermediate (WTI) crude futures slipped 2.70% to $76.49 per barrel.
In the week, the global and US benchmarks were down around 2% and over 3%, respectively. Still, signs of strong fuel demand and supply fears are expected to support prices in the coming days.
Fed Rate Cut Hopes Weaken, Analysts See Demand Still Healthy
Weakness in crude prices came after Fed Governor Christopher Waller called on Thursday for a steady and cautious approach to interest rate cuts this year.
Waller proposed holding off easing monetary policy by two more months to confirm whether a recent increase in US inflation indicates a hindrance in development toward price stability or is only a setback.
Extending the period of higher interest rates could impede growth in the world’s largest economy, resulting in limited oil demand in the US.
The central bank has left the federal funds rate unchanged at 5.25%-5.5% since July 2023. Minutes of the Fed’s January meeting also showed central bankers’ concern over being haste about easing policy.
If inflation in the country starts rising again, the demand for energy products will turn sluggish, according to economist Tim Snyder.
Snyder said such an outlook is not what the market prefers at the moment, especially when it is determining a trajectory.
However, certain analysts have stated that demand was mostly strong, including in the US, the world’s top consuming country.
JPMorgan Chase & Co. estimated oil demand growth at 1.7 million barrels per day (bpd) month over month (MoM) through February 21. That compared to the 1.6 million bpd surge the week earlier, which was potentially due to increased travel in China and Europe.
On the Middle East side, discussions of a Gaza truce have begun in France, possibly giving the market the drive to expect easing geopolitical woes.
Still, conflict in the Red Sea persisted, with assaults from Yemen’s Houthi militant group on Thursday prompting more container ships to reroute.
Additionally, US energy companies’ oil rig count this week rose to their highest since November and in a month since October 2022. Data from Baker Hughes Co. showed that the number of oil rigs climbed 503 this week and soared by four in February.
The oil rig count is an essential early measure of future production.
