Oil Prices Set for Steepest Weekly Drop in 3 Months

OIL PRICE - SINGAPORE. Oil prices edged up on Friday on the prospect of OPEC+ continuing output cuts, but the crude benchmarks were headed for the steepest weekly losses in three months on demand uncertainty and easing tensions in the Middle East reducing supply risks.

Brent crude futures for July rose 24 cents to $83.91 a barrel by 0514 GMT. U.S. West Texas Intermediate crude for June was up 19 cents, or 0.3%, to $79.19 per barrel.

Still, both benchmarks were on track for weekly losses as investors worried about the prospect of higher-for-longer interest rates curbing growth in the U.S., the top global oil consumer, and in other parts of the world.

"With the US driving season almost upon us, high inflation may see consumers opt for shorter drives over the holiday period," analysts at ANZ Research said in a note on Friday.

The market is now looking towards U.S. economic data and indicators of future crude supply from the world's top producer.

The U.S. Federal Reserve held interest rates steady this week, and flagged recent disappointingly high inflation readings that could make rate cuts take awhile in coming.

Read Also: Gold Set for Second Weekly Fall; US Payrolls on Investors' Radar

Geopolitical risk premiums due to the Israel-Hamas war, which had kept prices high due to global supply risks, are also fading, with Israel and Hamas considering a temporary ceasefire and holding talks with international mediators.

Brent headed for a 6.3% weekly decline, while WTI moved towards a loss of 5.6% on the week.

The drop comes just weeks ahead of the next meeting of the Organization of the Petroleum Exporting Countries and allies led by Russia, together called OPEC+.

Three sources from OPEC+ producers said the group could extend its voluntary oil output cuts of 2.2 million barrels per day beyond June if oil demand fails to pick up, but the group has yet to begin formal talks ahead of the June 1 meeting.

Later on Friday, the U.S. Bureau of Labor Statistics will release its monthly nonfarm payroll report, which is a measure of the strength of the country's job market and is considered by the Fed when setting interest rates. Higher rates typically weigh on the economy and that can reduce oil demand.

Also on Friday, energy services firm Baker Hughes is due to release its weekly count of oil and gas rigs, an indicator of future crude output.