By Arathy Somasekhar
HOUSTON (Reuters) -Oil prices rose 1% on Friday, but looked set for a weekly loss after strong U.S. economic data reinforced expectations that interest rates might remain elevated for an extended period and curb fuel demand.
The Brent crude July contract rose 87 cents to $82.22 a barrel as of 1:40 p.m. ET (1740 GMT). The more-active August contract was up 84 cents at $81.95.
U.S. West Texas Intermediate (WTI) crude futures rose 93 cents to $77.80, on some expectations of high summer travel demand starting this weekend.
On Thursday, Brent closed at its weakest since Feb. 7 and U.S. WTI futures at their lowest since Feb. 23.
Brent was on track to close down 2.1% for the week. It declined for four straight sessions this week, its longest losing streak since Jan 2. WTI was set to close down 2.8% for the week.
“Petroleum prices remain soft in early Friday dealings, with worries over Federal Reserve interest rate policy and last week’s bump in US crude oil inventories still weighing on market sentiment,” said Tim Evans, an independent energy analyst.
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 surged.
Fed Chair Jerome Powell and other policymakers have since said they feel further increases are unlikely.
Higher interest rates increase the cost of borrowing, which can slow economic activity and dampen demand for oil.
Consumer sentiment also fell to a five-month low on mounting fears about borrowing costs staying high. At face value, pessimism among households would imply slower consumer spending, though the relationship between the two has been weak.
“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.”
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.
Analysts largely anticipate that current production cuts will be extended at least to the end of September.
Russia, in a rare admission of oil overproduction, said this week it exceeded its OPEC+ production quota in April for “technical reasons,” a surprise that analysts and industry sources say shows Moscow’s challenges in curbing output.
“After the OPEC+ meeting, the market is likely to increasingly focus on demand again. The upcoming Memorial Day weekend marks the start of the summer driving season in the U.S.,” said Commerzbank analyst Barbara Lambrecht.
U.S. gasoline product supplied, a proxy for demand, reached its highest level since November in the week to May 17, the Energy Information Administration (EIA) said on Wednesday.
Meanwhile, the dollar was set for its largest weekly rise in a month-and-a-half on Friday, making dollar-denominated crude more expensive for foreign buyers.
(Reporting by Arathy Somasekhar in Houston, Robert Harvey and Natalie Grover in London, Georgina McCartney in Houston and Jeslyn Lerh in Singapore; Editing by David Goodman, Richard Chang and Sharon Singleton)
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