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Oil prices held steady on Friday as investors weighed the latest remarks from the U.S. Federal Reserve regarding interest rates amid persistent inflation, while signs of robust seasonal U.S. fuel demand provided support.
Brent crude futures edged up 5 cents to $81.41 a barrel by 0640 GMT, while U.S. West Texas Intermediate (WTI) crude futures rose 2 cents to $76.89 a barrel. Despite this stability, both benchmarks had settled at multi-month lows on Thursday, with Brent closing at its weakest since January and WTI hitting a three-month low.
Weekly Performance
For the week, Brent futures were headed for a decline of more than 3%, and WTI futures were poised for a nearly 4% slide compared to last week. This downward trend is largely attributed to ongoing macroeconomic constraints in the U.S. that continue to influence oil prices.
Minutes released on Wednesday from the Federal Reserve’s latest policy meeting revealed that policymakers are still debating whether current interest rates are sufficient to curb stubborn inflation. Some officials expressed willingness to raise borrowing costs further if inflation spikes. However, Fed Chair Jerome Powell and other policymakers have indicated that additional rate hikes are unlikely at this point.
Higher interest rates could potentially slow economic growth and reduce fuel demand, contributing to the cautious outlook on oil prices.
Seasonal U.S. Fuel Demand
On the positive side, increasing U.S. gasoline demand has helped stabilize prices ahead of the Memorial Day holiday weekend, which marks the start of the U.S. summer driving season. According to the Energy Information Administration (EIA), gasoline demand in the U.S. reached its highest level since November. This surge in demand is significant as U.S. drivers account for approximately a tenth of global oil demand, making the upcoming driving season crucial for the recovery in global demand growth.
Upcoming OPEC+ Meeting
Looking ahead, the market’s attention is focused on the upcoming meeting of the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, on June 1. The group will discuss whether to extend voluntary oil output cuts of 2.2 million barrels per day, a decision that could further influence global oil prices.
