Oil prices dipped on Friday as concerns about U.S. fuel demand outweighed expectations that the Federal Reserve’s first rate cut of the year would encourage greater consumption.
At 0656 GMT, Brent crude futures were down 17 cents, or 0.3%, at $67.27 a barrel, while U.S. West Texas Intermediate (WTI) futures lost 19 cents, also 0.3%, to $63.38. Both benchmarks, however, were still on track for a second consecutive weekly gain.
The Fed lowered its policy rate by a quarter point on Wednesday and suggested further cuts could follow in response to signs of weakness in the labor market. Lower borrowing costs generally support higher oil demand, which can push prices up.
“The market has been caught between conflicting signals,” said Priyanka Sachdeva, an analyst at Phillip Nova.
She noted that demand-side concerns, highlighted by warnings from the Energy Information Administration and other energy agencies, have tempered expectations for near-term price gains.
“On the supply side, planned production increases from OPEC+ and signs of oversupply in U.S. fuel-product inventories are weighing on sentiment.”
U.S. distillate inventories rose by 4 million barrels, surpassing the 1 million barrels expected, fueling concerns about demand in the world’s largest oil-consuming country and adding pressure to prices.
Economic data also added to the cautious sentiment. Jobless claims showed the U.S. labor market has softened, with reduced demand for and supply of workers, while single-family homebuilding fell to its lowest level in 2-1/2 years in August amid a glut of unsold homes.
In Russia, the world’s second-largest oil producer in 2024 after the U.S., the finance ministry introduced a measure to protect the state budget from oil price volatility and Western sanctions, relieving some supply worries.
“President Trump’s comment that he preferred low prices over sanctions on Russia also eased concerns over supply disruptions,” ANZ analyst Daniel Hynes said in a note on Friday.
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