LDN - Business

Oil prices settle down after data shows weaker US consumer sentiment

[July 13, 2024] By Nicole Jao

NEW YORK (Reuters) -Oil futures prices settled slightly lower on Friday as investors weighed weaker U.S. consumer sentiment against mounting hopes for a Federal Reserve rate cut in September.

Brent crude futures settled 37 cents lower to $85.03 a barrel. U.S. West Texas Intermediate crude futures fell 41 cents, or 0.5%, to close at $82.21 a barrel.

For the week, Brent futures fell more than 1.7% after four weeks of gains. WTI futures posted 1.1% weekly decline.

A monthly survey by the University of Michigan showed U.S. consumer sentiment fell to an eight-month low in July, although inflation expectations improved for the next year and beyond.

The U.S. Labor Department said the producer price index (PPI) rose 0.2% in June, slightly more than expected, as the cost of services climbed. Still, investors expect the Fed could start cutting rates in September.

"The market isn't afraid of the Fed at this point," said Phil Flynn, an analyst at Price Futures Group.

Lower rates are expected to boost economic growth, which could boost fuel consumption.

"Cooling U.S. inflation numbers may support the case for the Fed to kick-start its policy easing process earlier rather than later," said Yeap Jun Rong, market strategist at IG.

"It also adds to the series of downside surprises in U.S. economic data, which points to a clear weakening of the U.S. economy," he added.

Oil prices have drawn some support from U.S. gasoline demand, which government data showed on Wednesday was at 9.4 million barrels per day (bpd) in the week ended July 5, the highest since 2019 for the week that includes the Independence Day holiday. Jet fuel demand on a four-week average basis was at its strongest since January 2020.

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An aerial view shows oil tanks of Transneft oil pipeline operator at the crude oil terminal Kozmino on the shore of Nakhodka Bay near the port city of Nakhodka, Russia June 13, 2022. REUTERS/Tatiana Meel/File Photo

The strong fuel demand encouraged U.S. refiners to ramp up activity and draw from crude oil stockpiles. U.S. Gulf Coast refiners' net input of crude rose last week to more than 9.4 million bpd for the first time since January 2019, government data showed.

Signs of weaker demand from China, the world's biggest oil importer, could counter the outlook from the United States and weigh on prices.

"The recent downside correction is evidently over, although the speed of further ascent might be hindered by falling Chinese crude oil imports, which plummeted 11% in June from the previous year," said Tamas Varga of oil broker PVM.

U.S. active oil rig count, an early indicator of future output, fell by one to 478 this week, the lowest since December 2021, energy services firm Baker Hughes reported on Friday.

Money managers raised their net long U.S. crude futures and options positions in the week to July 9, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday.

(Reporting by Nicole Jao and Shariq Khan in New York, Paul Carsten in London, Arunima Kumar in Bengaluru and Jeslyn Lerh in Singapore; Editing by Sherry Jacob-Phillips, Susan Fenton, David Evans, Will Dunham and David Gregorio)

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