Oil on track for weekly loss over demand concerns

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Oil prices appeared headed for a weekly loss on Friday despite recovering some from a retreat on Thursday as markets reacted to concerns that elevated inflation could continue to stick around and hurt demand.

U.S. West Texas Intermediate (WTI) crude futures were up 1.13% to $77.74 as of 3:24 p.m. ET, while the Brent crude July contract rose to $82.13.

Oil prices looked poised for a weekly loss Friday amid concerns that sticky inflation could hurt demand. (REUTERS/Nichola Groom/File Photo / Reuters Photos)

On Thursday, Brent closed at its weakest since February 7 and U.S. WTI futures at their lowest since February 23.

Brent was on track to close down 2.2% for the week. It declined for four straight sessions this week, its longest losing streak since January 2. WTI was set to close down 2.9% for the week.

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"Petroleum prices remain soft in early Friday dealings, with worries over Federal Reserve interest rate policy and last week's bump in U.S. crude oil inventories still weighing on market sentiment," said Tim Evans, an independent energy analyst.

Mobile offshore drilling units stand in the Port of Cromarty Firth in Cromarty, Scotland, on Tuesday, June 23, 2020. Oil looked headed for a weekly decline on Friday. (Photographer: Dimas Ardian/Bloomberg via Getty Images / Getty Images)

FOX Business contributor Phil Flynn wrote in The Energy Report on Friday that "concerns about inflation and rising interest rates put a damper on most of the markets" on Thursday, and that "Today, believe it or not, the market is getting some pressure from a Reuters report that Vladimir Putin is looking for a ceasefire in Ukraine."

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Minutes of the Fed's latest policy meeting released on Wednesday showed policymakers questioning whether interest rates were high enough to tame stubborn inflation. Some officials were willing to raise borrowing costs again if inflation surges.

Fed Chair Jerome Powell and other policymakers have since said they feel further increases are unlikely.

U.S. Federal Reserve Chair Jerome Powell during an on-stage discussion at a meeting of The Economic Club of Washington, at the Renaissance Hotel in Washington, D.C., February 7, 2023. (REUTERS/Amanda Andrade-Rhoades/File Photo / Reuters Photos)

Higher interest rates increase the cost of borrowing, which can slow economic activity and dampen demand for oil.

"Macroeconomic developments have been failing to provide meaningful support for oil," PVM analyst Tamas Varga said. "It is a fair bet that rate cuts are slipping away."

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The market is awaiting a June 2 online meeting of the OPEC+ producer group comprising the Organization of the Petroleum Exporting Countries and its allies to discuss whether to extend voluntary oil output cuts of 2.2 million barrels per day.

Reuters contributed to this report.