© Reuters.
Investing.com– Oil prices fell Friday, and were set to close the week lower as concerns over sluggish demand overshadowed bets on tighter supplies due to disruptions in the Middle East.
By 09:30 ET (14.30 GMT), the futures traded 1.9% lower at $77.14 a barrel and the Brent contract dropped 1.7% to $82.23 a barrel.
A string of weak economic readings from across the globe spurred more concerns over slowing demand, especially after data released last week showed the U.K. and Japan both entering recessions in the fourth quarter.
Expectations of higher-for-longer U.S. interest rates also weighed on the outlook for crude demand, as several signals from the Federal Reserve showed the bank was in no hurry to begin trimming interest rates.
Weak PMIs, hawkish Fed signals weigh
and WTI contracts were set to lose between 1% and 2% this week, with pressure coming from persistent concerns over the outlook for demand.
The weekly losses also stemmed a two-week rally in oil prices, which now appeared to be running out of steam.
Purchasing managers index readings from , the and the all showed a deterioration in business activity through February, while fresh stimulus measures in China inspired little confidence.
An unexpected drop in weekly , coupled with a barrage of hawkish signals from the Fed, with stating on Thursday that the central bank should delay interest rate cuts by at least another couple more months to see if a recent uptick in inflation signals stalling progress toward price stability, also cast more doubt over the prospect of early interest rate cuts in 2024.
The Fed is now only expected to begin trimming rates in the second half of the year, with Goldman Sachs becoming the latest bank to say that they no longer think the U.S. Federal Reserve will move to slash interest rates at its policy meeting in May.
Tighter US inventories, Middle East disruptions offer some price support
Losses in crude prices were still limited by some expectations of tighter supplies. Official data showed U.S. grew less than expected in the week to February 16, especially as a string of refineries resumed production after an extended winter break.
But a smaller-than-expected draw in raised some concerns over weak demand in the world’s largest fuel consumer.
The conflict in the Middle East showed little signs of stopping after the U.S. vetoed a third United Nations proposal for an immediate ceasefire in Gaza.
That said, Israel Prime Minister Benjamin Netanyahu’s war cabinet has approved sending negotiators to truce talks taking place in Paris on Friday.
Still, the Yemeni Houthis have continued to carry out strikes against vessels in the Red Sea, indicating continued disruptions in shipping activity and heralding delayed oil deliveries to parts of Europe and Asia.
(Ambar Warrick contributed to this article.)
