Oil down as rate hike concerns cast a shadow over demand ‎outlook

Oil prices fell today, Friday, heading for weekly losses, as strong US economic data increased concern about the continuation of the Federal Reserve (US Central Bank) monetary tightening policy to curb inflation, which may affect fuel demand even with the growth of crude stocks.

By 0105 GMT, Brent crude futures fell 49 cents, or 0.6 percent, to $84.65 a barrel, while West Texas Intermediate crude futures fell 46 cents, or 0.6 percent, to $78.03. The two raw materials are heading to record a weekly decline of about 2 percent

According to Reuters, data showed that the producer price index in the United States increased by 0.7 percent in January, after declining by 0.2 percent in December. Meanwhile, applications for unemployment benefits unexpectedly fell to 194,000, versus an expectation of 200,000 applications in a Reuters poll.

“The strong US data reinforced concerns about raising interest rates and led to an increase in US Treasury yields, which put pressure on oil and other commodity prices,” said Kazuhiko Saito, senior analyst at Fujitomi Securities.

He added that the increase in crude stocks in the United States exacerbated the pressure.

On Wednesday, the Energy Information Administration reported that US crude oil inventories rose last week to the highest level since June 2021, after a larger-than-expected increase.

“However, the loss was limited as investors expect a recovery in fuel demand in China,” Saito said.

The International Energy Agency said this week that China will account for nearly half of global oil demand growth this year after easing restrictions related to Covid-19, but the restrictions imposed by OPEC + countries, the group that includes the Organization of the Petroleum Exporting Countries (OPEC) and allies. On production, this may mean a supply deficit in the second half of the year

Saudi Energy Minister Prince Abdulaziz bin Salman said that the current OPEC + agreement to reduce oil production by two million barrels per day will remain until the end of the year, adding that he remains cautious about Chinese demand.