Oil prices fall amid expectations of interest rate cuts, economic sentiment

(MENAFN) Oil prices concluded the week with losses after a four-week winning streak, as futures settled slightly lower on Friday amidst cautious investor sentiment influenced by weaker consumer confidence and expectations of Federal Reserve interest rate cuts in September.

At the close of trading on Friday, brent crude futures fell by 37 cents to settle at USD85.03 per barrel, while U.S. West Texas Intermediate (WTI) crude futures declined by 41 cents, or 0.5 percent, ending the day at USD82.21 per barrel. Despite starting the week with optimism, Brent crude futures saw a decline of more than 1.7 percent, marking their first weekly loss in five weeks, while WTI futures were down 1.1 percent over the same period.

The University of Michigan's monthly survey highlighted a notable decrease in U.S. consumer sentiment to an eight-month low in July, despite more favorable expectations regarding inflation for the near and long term. In contrast, the U.S. Labor Department reported a 0.2 percent increase in its producer price index for June, slightly exceeding expectations, driven by rising service costs. Investors interpreted these economic indicators amidst ongoing expectations that the Federal Reserve will initiate interest rate cuts starting in September.

Federal Reserve Chairman Jerome Powell acknowledged recent improvements in price pressures but emphasized the need for further data to solidify the case for reducing interest rates. These deliberations by the Fed added to market uncertainties surrounding future economic policies.

Supporting oil prices earlier in the week was robust U.S. gasoline demand, reaching 9.4 million barrels per day in the week ending July 5, the highest level for that week since 2019, which includes the Independence Day holiday. Additionally, jet fuel demand over a four-week average showed its strongest performance since January 2020. Strong demand encouraged U.S. refiners to increase operations and draw down crude oil inventories, reflecting a positive outlook for fuel consumption amidst seasonal peaks.

Overall, while early optimism boosted oil prices, broader economic indicators and Federal Reserve policy expectations tempered market sentiment, leading to a weekly decline in oil futures despite robust demand signals in the U.S. petroleum market.

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