Oil prices edged lower on Friday after the U.S. inventory data showed lacklustre fuel demand in the world’s largest oil consumer while worsening U.S-China tensions weighed on global financial markets.
Brent crude slipped 25 cents, or 0.7 per cent, to $35.04 a barrel by 0334 GMT and the U.S. West Texas Intermediate crude was at $33.18 a barrel, down 53 cents, or 1.6 per cent.
Still, both contracts are set for a fifth weekly gain, helped by production cuts and optimism about demand recovery in other countries.
Economist, Howie Lee, said:
The rally needs a breather.
It has been four weeks of gains and the market needs to buy time for downstream prices to catch up.
Beyond the short term, the bullish momentum still looks rather intact.
Thursday’s data from the Energy Information Administration showed that the U.S. crude oil and distillate inventories rose sharply last week.
Fuel demand remained slack even as various states lifted travel restrictions they had imposed to curb the coronavirus pandemic, analysts said.
RBC Capital Markets analyst, Christopher Louney, said in a note:
Memorial Day weekend did not bring the U.S. motorists out in droves like many market bulls were hoping.
The traders, in the future, will be focusing on the outcome of talks on output cuts between members of OPEC+, the Organisation of the Petroleum Exporting Countries (OPEC) and allies including Russia, in the second week of June.
Saudi Arabia and some OPEC members are considering extending record production cuts of 9.7 million barrels per day beyond June, but have yet to win support from Russia.
The prices of crude oil had slipped to its lowest in over a decade following the outbreak of the Coronavirus pandemic.
The fall in oil prices affected oil-dependent economies, with such countries as Nigeria forced to cut down on its annual budget, while also resorting to external borrowing to fund capital projects.
