Oil prices fall further as supply-driven rally cools, weekly gains on tap

investing.com:

Investing.com-- Consolidation in oil markets continued in Asian trade on Friday, with prices falling further below 10-month peaks as a mix of profit taking, strength in the dollar and fears of an economic slowdown in major consumers weighed. 

Crude prices retreated on Thursday, shrugging off a positive U.S. inventory report and strong Chinese import figures. Analysts attributed the move to some profit taking after crude rallied over 7% in the past 10 sessions.

But strength in the dollar, which jumped to a near six-month peak on Thursday, appeared to have taken some wind out of the crude rally, especially as signs of resilience in U.S. inflation and the labor market fed concerns over rising interest rates in the country.

While recent data also showed that U.S. inventories shrank more than expected in the week to September 1, analysts questioned whether strong demand would persist in the coming weeks, especially as the travel-heavy summer season comes to a close. 

Brent oil futures fell 0.2% to $89.61 a barrel, while West Texas Intermediate crude futures fell 0.4% to $86.56 a barrel by 21:38 ET (01:38 GMT).

But both contracts were still set to gain over 1% each this week, buoyed by a tighter supply outlook after major producers Saudi Arabia and Russia flagged bigger-than-expected production cuts this week.

Saudi Arabia will maintain its 1 million barrel per day production cut until end-2023, while Russia will also maintain its 300,000 barrel export reduction until the end of the year.

The prospect of tighter supplies sparked strong gains in oil prices over the past week, as markets bet that lower production will help ease any headwinds from sluggish demand in the remainder of the year. 

But traders now questioned just how