Oil heads for a weekly decline on fears of higher rates and higher supply

By Alex Lawler

LONDON, Feb 17 (Reuters) – Oil fell nearly 2% on Friday and was heading for a weekly decline, under pressure from fears that further rate hikes by the U.S. Federal Reserve could weigh on demand, and by signs of an abundant supply.

Two Federal Reserve officials warned on Thursday that higher borrowing costs are key to bringing inflation back to desired levels. Rising expectations of rate hikes boosted the US dollar, making oil more expensive for holders of other currencies.

Brent crude futures were down $1.59, or 1.9%, at $83.55 a barrel at 09:01 GMT, while US crude West Texas Intermediate (WTI) was down $1.57, or 2.%, to $76.92.

Both benchmarks were heading for a weekly drop of more than 3%.

“Rate hike nervousness is back in full force,” said Stephen Brennock of PVM.

Several signs of abundant supply also weighed on the market.

Russian oil producers expect to maintain current crude export volumes despite a government plan to cut oil production in March, the Vedomosti daily reported on Friday, based on sources familiar with the companies’ plans. .

The latest U.S. supply report, released on Wednesday, showed crude inventories for the week ending Feb. 10 rose 16.3 million barrels to 471.4 million barrels, their highest level since June 2021.

The International Energy Agency and the Organization of the Petroleum Exporting Countries this week raised their forecasts for global oil demand growth for this year, citing expectations of stronger Chinese demand.

And Saudi Arabia’s energy minister said the current OPEC+ deal, which brings together OPEC producers with Russia and others, to cut oil production targets by 2 million barrels per day, would hold out until the end of the year, adding that he remained cautious. at Chinese request.

(Additional reporting by Yuka Obayashi and Sudarshan Varadhan; editing by Jason Neely, Spanish editing by José Muñoz in the Gdansk newsroom)