By Nicole Jao
NEW YORK (Reuters) – Oil prices fell on Friday as investors weighed weak U.S. fuel demand and took some money off the table at the end of the quarter, while key inflation data for May raised chances the Federal Reserve will cut interest rates this year .
Futures for the August settlement, which expired Friday, rose 2 cents to $86.41 a barrel. The more liquid September contract fell 0.3% to $85 a barrel.
U.S. West Texas Intermediate (WTI) crude futures fell 20 cents, or 0.24%, to $81.54.
Brent rose 0.02% this week, while WTI futures lost 0.2%. Both benchmarks gained about 6% this month.
While U.S. oil production and demand rose to a four-month high in April, gasoline demand fell to 8.83 million barrels per day, the lowest since February, according to the Energy Information Administration’s Petroleum Supply Monthly report. was published on Friday.
“The EIA’s monthly report suggested that gasoline demand was quite poor,” said Phil Flynn, an analyst at Price Futures Group. “Those figures have not really led to more purchases.”
Analysts said some traders took profits at the end of the second quarter after prices rose earlier this month.
The U.S. personal consumer expenditures (PCE) price index, the Fed’s preferred inflation gauge, was flat in May, boosting hopes for rate cuts in September.
Yet the reaction on the financial markets was minimal. For oil traders, the publication went unnoticed, says Charalampos Pissouros, senior investment analyst at brokerage XM.
Growing expectations of a Fed easing cycle have led to a risk rally in equity markets. Traders now estimate a 64% chance of a first rate cut in September, up from 50% a month ago, according to CME’s FedWatch tool.
Lowering interest rates could be a boon for oil because it could increase consumer demand.
“Oil prices have been converging with our fair value estimates of late, revealing the underlying strength of fundamentals through a brightening in the fog of war,” Barclays analyst Amarpreet Singh wrote in a client note.
Barclays expects Brent crude to remain around $90 per barrel in the coming months.
Oil prices may not change much in the second half of 2024 on concerns about Chinese demand and the prospect of increased supply from key producers to counter geopolitical risks, a Reuters poll showed on Friday.
Brent crude is expected to average $83.93 per barrel in 2024, with an average of $79.72, the poll found.
The number of active oil platforms in the US, an early indicator of future production, fell by six this week to 479, the lowest level since December 2021, according to energy services company Baker Hughes.
Money managers increased their net long crude oil futures and options positions in the week to June 25, the US Commodity Futures Trading Commission (CFTC) said.
