Oil prices fell on Friday, continuing a recent downward trend due to unexpected increases in U.S. product inventories, which have raised concerns about weak fuel demand. Additionally, signs of weakening business activity in China, the world’s top oil importer, have put further pressure on prices.
OPEC+ Meeting in Focus
Attention is now turning to the upcoming meeting of the Organization of the Petroleum Exporting Countries and its allies (OPEC+). The cartel is expected to extend its current production cuts beyond the end of June.
Brent oil futures for July delivery fell by 0.3 percent to $81.61 per barrel, while West Texas Intermediate (WTI) crude futures dropped 0.4 percent to $77.64 per barrel. Both contracts are on track to lose nearly 5 percent in May due to ongoing concerns about weak demand this year.
Inventory Data Raises Demand Concerns
U.S. oil inventories experienced a larger-than-expected drawdown of nearly 4.2 million barrels for the week ending May 24, compared to expectations of a 1.6 million barrel decline. However, gasoline and distillate inventories increased more than anticipated, heightening worries about weakening fuel demand.
Although travel demand is expected to rise during the summer months, it may not grow as much as previously anticipated due to challenges from high inflation, rising interest rates, and slowing economic growth.
Concerns about slowing U.S. economic growth intensified after revised GDP data revealed weaker-than-expected growth in the first quarter.
China PMI Data Disappoints
In China, manufacturing and non-manufacturing PMI data were disappointing, signaling a slowdown in business activity. This has added to fears of sluggish oil demand in the world’s largest importer.
PCE Data in Focus
Upcoming U.S. PCE inflation data will be closely monitored, as it could influence the Federal Reserve’s interest rate decisions. Persistent concerns about high U.S. interest rates have weighed on oil prices, as they raise worries about future economic activity and fuel demand.
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