Oil prices retreated during the week ending June 18 from the multi-year highs of both benchmarks after the US Federal Reserve’s interest rate trajectory, making dollar-indexed oil more expensive for buyers.
International benchmark Brent crude traded at $72.33 at 1100 GMT on Friday, posting more than a 0.95% drop from Monday when trade at 0627 GMT registered at $73.03 per barrel.
American benchmark West Texas Intermediate (WTI) traded at $70.30 at the same time on Friday, decreasing over 1.31% relative to $71.23 a barrel on Monday.
Oil prices have been on the rise especially since OPEC+ countries agreed to stick to their decision to gradually increase production until the end of July. Although rising supply is not what the market needs at a time when it is struggling with pandemic-induced low demand, investors interpreted the decision as confidence in strong demand.
Brent hit $74.94 on Wednesday, the highest since April 2019 when it traded at $75.60. WTI, however, reached $72.98, the highest level since October 2018 when it hit $76.90.
Positive price forecasts of Goldman Sachs and Fitch Ratings based on improving market conditions also contributed to the recent spike in prices.
As demand rebounds sooner than expected, Goldman Sachs predicted that Brent crude would surpass $80 per barrel this summer. Fitch Ratings also increased its 2021 price forecast to $63 a barrel from $58 a barrel for Brent.
Both the Organization of Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) had expressed optimism about a faster recovery in oil demand last week, predicting that demand would surge by 6% in 2021, particularly in the second half of the year.
Expectations that road and air traffic in the US and Europe will return to pre-pandemic levels as countries ease mobility restrictions also lifted prices higher.
Prices started sliding on Thursday over the double whammy of the rising value of the US dollar, as the country’s Federal Reserve indicated it would raise interest rates sooner than expected, and a surprise rise in US fuel stocks, signaling sliding demand.
Although US crude oil inventories decreased by 7.4 million barrels, or 1.6%, last week, the country’s Energy Information Administration (EIA) announced that the gasoline inventories rose by 2 million barrels, or 0.8%, signaling lower demand.
Weighing further on prices, the virus cases in the UK saw the highest rate since February.
A total of 11,007 new COVID-19 cases were detected on Thursday, which was mostly blamed on the Delta variant of the virus first detected in India.
By Sibel Morrow