Oil prices remain flat in early trade

7 Jul 2023 , 11:36 AM

Oil prices were mostly flat on Friday but were projected to rise for the week as hints of tighter supply following a more significant decline in U.S. oil stocks outweighed concerns that rising interest rates in the US would reduce energy demand.

Brent oil futures were down a penny at $76.51, while U.S. West Texas Intermediate crude was up a cent at $71.82.

For the second week in a row, both benchmarks were forecast to increase by roughly 2%.

According to the Energy Information Administration, U.S. crude stocks decreased more than anticipated due to high refining demand, while petrol supplies experienced a significant decrease as a result of an increase in driving last week.

Leading oil exporters Saudi Arabia and Russia recently announced new output reductions for August. The overall reductions currently amount to more than five million barrels per day (bpd), or 5% of the world’s oil production.

However, rising expectations that the Federal Reserve will increase interest rates at its meeting on July 25–26 after keeping them unchanged at 5%–5.25% in June restrained the rise in oil prices.

According to data released on Thursday, while private payrolls soared in June, the number of Americans submitting new claims for unemployment benefits grew slightly last week. This increases the possibility that the Federal Reserve will raise interest rates this month.

Higher interest rates make borrowing more expensive for households and businesses, which might impede economic growth and lower demand for oil.

When it releases its first forecast later this month, OPEC will probably still have a positive prognosis on the growth of oil demand for the following year, predicting a slower rate of growth than this year but still an above-average rise, according to sources close to the organisation.

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