Oil prices steady as rate hike fears offset signs of tightening supply

economictimes.indiatimes.com:

Oil prices were largely unchanged on Friday, but set to post weekly gains, as fears of higher U.S. interest rates that could dampen energy demand were offset by signs of tighter supply after a larger-than-expected fall in U.S. oil stocks.

Brent crude futures were down 1 cent at $76.51 a barrel at 0006 GMT, while U.S. West Texas Intermediate crude gained 2 cents to $71.82 a barrel. Both benchmarks were set to gain about 2% for the second straight week.

U.S. crude stocks drew more than expected on strong refining demand, while gasoline inventories posted a large draw after an increase in driving last week, the Energy Information Administration said on Thursday. That comes as top oil exporters Saudi Arabia and Russia announced a fresh round of output cuts for August.

The total cuts now stand at more than five million barrels per day (bpd), equating to 5% of global oil output. However, oil prices were capped on strengthening expectations the U.S. central bank is likely to raise interest rates at their July 25-26 meeting after holding rates steady at 5%-5.25% in June.

The number of Americans filing new claims for unemployment benefits increased moderately last week, while private payrolls surged in June, data showed on Thursday, raising the likelihood of a Federal Reserve rate hike this month. Higher interest rates increase borrowing costs for businesses and consumers, which could slow economic growth and reduce oil demand. Still, OPEC will likely maintain an upbeat view on oil demand growth for next year when it publishes its first outlook later this month, predicting a slowdown from this year but still an above-average increase, sources close to OPEC said.