Oil prices experienced a slight decline on Friday, as stronger-than-expected U.S. inflation data raised doubts about the extent of future interest rate cuts. Despite this dip, prices were on track for their second consecutive week of gains, driven by ongoing concerns over potential supply disruptions in the Middle East, which continued to fuel a risk premium. Additionally, markets were closely monitoring the effects of Hurricane Milton on U.S. oil production, especially as the storm impacted Florida.
Brent crude futures for December delivery dropped 0.5 percent to $78.98 a barrel, while West Texas Intermediate (WTI) futures fell 0.4 percent to $74.79 a barrel by 21:15 ET (01:15 GMT).
Strong CPI data challenges rate cut expectations
Oil prices faced downward pressure from a resilient dollar, as hotter-than-anticipated U.S. consumer price index (CPI) inflation raised concerns about a slower pace of interest rate reductions by the Federal Reserve. The possibility of U.S. rates remaining elevated for an extended period heightened fears of an economic slowdown, which could dampen demand from the world’s largest fuel consumer.
Moreover, data indicating a larger-than-expected increase in U.S. inventories added to the worries about weakening demand, although this had a minimal impact on oil prices this week.
In the U.S., attention was also directed towards Hurricane Milton’s potential effects on oil production, although the storm appeared to largely miss key oil infrastructure in the Gulf of Mexico.
Oil set for weekly gains amid Middle East tensions
Brent and WTI futures were poised for a weekly increase of between 1 percent and 1.8 percent, marking their second week of gains. Oil markets remained buoyed by ongoing concerns regarding escalating conflicts in the Middle East.
Additionally, attention was focused on potential stimulus measures in China, the leading oil importer, after markets reacted lukewarmly to initiatives announced in late September. Beijing is expected to introduce further fiscal stimulus measures on Saturday.
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