TOKYO: Oil prices slid on Friday and were on track for weekly losses as strong U.S. economic data heightened concern that the Federal Reserve will continue tight monetary policy to tackle inflation, which could hit fuel demand even as crude stockpiles grow.
Brent crude futures dropped 49 cents, or 0.6%, to $84.65 per barrel by 0105 GMT, while U.S. West Texas Intermediate (WTI) crude futures shed 46 cents, also a 0.6% loss, to $78.03. Both benchmarks were headed for a weekly decline of about 2%.
Data showed the U.S. producer price index rose 0.7% in January, after declining 0.2% in December. Meanwhile, jobless claims unexpectedly fell to 194,000, compared to the 200,000 forecast, according to a Reuters poll.
“Strong U.S. data bolstered concerns over rate hikes and prompted a rise in U.S. Treasury yields, which weighed on oil and other commodity prices,” said Kazuhiko Saito, chief analyst at Fujitomi Securities Co Ltd.
A build in U.S. crude stockpiles also added to pressure, he said.
The Energy Information Administration (EIA) on Wednesday reported U.S. crude oil stockpiles last week rose to their highest level since June 2021 after a larger-than-expected build.
“Still, the loss was limited as investors expect a recovery in fuel demand in China,” Saito said, predicting the market will continue to stay within a tight range for the time being without a clear direction. Oil prices have seesawed over the past weeks between fears of a recession hitting the United States amid inflation-fighting rate hikes and hopes for a pick-up in demand in China, the world’s top oil importer.
The International Energy Agency (IEA) said this week that China will make up nearly half of this year’s oil demand growth after it relaxed its COVID-19 curbs, but restrained production by OPEC+ countries – members of the Organization of the Petroleum Exporting Countries and allies – could mean a supply deficit in the second half.
Saudi Energy Minister Prince Abdulaziz bin Salman said the current OPEC+ deal to cut oil production targets by 2 million barrels per day would be locked in until the end of the year, adding he remained cautious on Chinese demand.