Crude Oil Settles Lower but Bags 2-Week Win Streak as Demand Outlook Improves
Oil prices settled lower on Friday, influenced by a stronger dollar, but still managed to secure a second-straight weekly win amid signs of improving demand in the United States, the world's biggest oil consumer.
At 14:30 ET, the futures traded 0.7% lower to settle at around $80.73 a barrel, and the contract fell 0.7% to $85.24 a barrel.
Stronger Dollar Weighs Down Oil Prices
A stronger dollar on Friday, buoyed by surprising data on services and manufacturing activity in June, dampened hopes for imminent rate cuts. Since oil is priced in dollars, a rising greenback makes it more expensive for foreign buyers, thereby weighing on demand.
Positive Demand Outlook
Despite the stronger dollar, the sentiment on demand remains positive due to recent data showing a decline in weekly U.S. crude and gasoline inventories. Data released on Thursday revealed a drawdown in U.S. crude stockpiles by 2.5 million barrels in the week ending June 14, surpassing the expected 2.2 million-barrel draw.
Additionally, U.S. government data showed that total product supplied, a proxy for the country's demand, rose by 1.9 million barrels per day (bpd) on the week to 21.1 million bpd.
Worries over economic activity in the world's largest economy have weighed on the crude market as the Federal Reserve maintains high interest rates.
“The 4-week average implied gasoline demand continues to trend higher as we move deeper into the U.S. summer driving season, which will ease some concerns over gasoline demand, although demand is still tracking just below levels seen last year,” said analysts at ING in a note.
Baker Hughes Rig Count Falls
The number of oil rigs operating in the U.S. fell by three to 485, according to data on Friday from energy services firm Baker Hughes. The decline in rig count, which points to drilling activity, comes even as the U.S. Energy Information Administration (EIA) raised its U.S. crude oil production forecast for 2024.
The EIA now projects U.S. crude oil production to average 13.24 million barrels per day this year, up from a previous estimate of 13.20 million barrels per day.
Geopolitical Risk Adds Support
Ukraine's military reported that its drones struck four oil refineries, radar stations, and other military objects in Russia early on Friday.
Meanwhile, Israel continues its bombardment of Gaza in its war with Hamas, only days after the country's Foreign Minister warned of a potential "all out war" with Lebanon's Hezbollah.
The head of Hezbollah this week pledged full-scale conflict with Israel in the event of a cross-border war and threatened EU member Cyprus for the first time.
A possible face-off between Israel and Hezbollah raises the risk of a wider conflict in this crucial oil-rich region, potentially disrupting global supplies.
