Oil fell $2 a barrel on Friday and ended the week significantly lower as traders fretted that potential interest rate rises in the United States would weigh on demand and were concerned about rising indicators of excess oil and gasoline supplies.
Two Fed members warned on Thursday that future increases in borrowing prices are required to keep inflation under control. Because of these views, the US dollar rose, making oil more costly for holders of foreign currencies.
Brent crude futures fell $2.14, or 2.5%, to $83.00 per barrel, a 3.9% drop from the previous week.West Texas Intermediate (WTI) U.S. crude finished at $76.34, down $2.15, or 2.7%, from last Friday’s price.
“Rate hike jitters have returned with a vengeance,” said Stephen Brennock of oil broker PVM.
Other signals of plentiful supply impacted the market as well.
Notwithstanding the government’s intention to limit oil output in March, Russian oil producers anticipate maintaining current crude oil export quantities, the Vedomosti daily said on Friday, citing individuals familiar with the businesses’ plans.
The most recent survey of US supply, issued on Wednesday, showed oil stocks increased by 16.3 million barrels in the week ending February 10 to 471.4 million barrels, the highest level since June 2021.
“Because oil storage is at a 19-month high, refiners are going to stretch out turnaround season for as long as they can,” said Bob Yawger, director of energy futures at Mizuho.
On Friday, heating oil cracks plunged 5% as mild weather reduced demand for the fuel in mid-February.
The oil and gas rig count, a leading predictor of future output, declined by one to 760 in the week ending Feb. 17, according to Baker Hughes Co., an energy services provider.
Despite this week’s rig reduction, Baker Hughes said that the overall number of rigs was still up 115, or 18%, from this time last year.
The International Energy Agency and the Organization of Petroleum Exporting Countries both raised their predictions for global oil demand growth this year this week, citing increased Chinese consumption.
And Saudi Arabia’s energy minister said the existing OPEC+ agreement to cut oil output objectives by 2 million barrels per day will be locked in until the end of the year, while remaining concerned about Chinese demand.