Oil is heading to record its first monthly increase this year with declining supplies

Oil prices rose on Friday, and Brent crude is heading for its first monthly increase this year, as a significant decline in US crude oil inventories erased fears that fuel demand would be affected by any new increase in interest rates.

Brent crude futures for September delivery were up 16 cents, or 0.2 percent, at $74.67 a barrel by 0405 GMT. The lowest-volume front-month contract, which expires on Friday, rose 30 cents to $74.64 a barrel.

US West Texas Intermediate crude rose eight cents, or 0.1 percent, to $69.95 a barrel.

Both benchmarks, after closing slightly higher on Thursday, are set to rise more than 2.5% in June. This will be the first monthly increase for Brent crude in 2023, but it will be the second for WTI, after it rose in April.

But on a quarterly basis, Brent crude appears to be heading for a loss of about 6% while WTI looks to be heading for a loss of around 7%.

Markets feared tight supply after the US Energy Information Administration said crude inventories fell by 9.6 million barrels in the week ending June 23, far exceeding analysts’ expectations in a Reuters poll for a decline of 1.8 million barrels.

Meanwhile, US first-quarter GDP growth was revised down to an annual rate of 2 percent, compared to the 1.3 percent reported earlier.

Strong US economic data and a decline in crude oil stocks come at a time when Saudi Arabia plans to implement a new production cut of one million barrels per day in July, in addition to a broader agreement by the OPEC + alliance to limit supplies until 2024.

But oil’s gains on Friday were capped by weak economic data from China and concerns about raising interest rates.

An official survey of factories in China on Friday showed that manufacturing activity contracted for the third month in a row in June, but at a slower pace. Non-manufacturing activity also declined in June.

The data came in largely in line with analysts’ expectations.

In the United States, Federal Reserve Chairman Jerome Powell indicated on Thursday that the bank is likely to resume its campaign to raise interest rates after keeping them unchanged earlier this month.