Oil will fall for the second time in the week on recession fears, the outlook for interest rates is clouding over

By Yuka Obayashi

TOKYO (Reuters) – Oil prices were little changed on Friday but face their second weekly decline as disappointing economic data from the US, the world’s largest crude oil consumer, and uncertainty about further rate hikes raised concerns about future fuel demand.

Brent crude oil futures for June traded at $78.53 a barrel, up 16 cents, or 0.2%, as of 0156 GMT. That contract expires on Friday and the more active July contract rose 21 cents, or 0.3%, to 78.43 a barrel.

US West Texas Intermediate (WTI) crude was up 23 cents, or 0.3%, to $74.99 a barrel.

Brent is expected to fall 3.8% this week and is down 9.1% over the past two weeks. WTI is on track to fall 3.8% this week, bringing its two-week decline to 9.4%.

US economic growth slowed more-than-expected in the first quarter, although jobless claims fell in the week ended April 22, data showed.

Investors are also concerned about potential rate hikes by inflation-fighting central banks, which could slow economic growth and hurt energy demand in the United States, Britain and the European Union.

The US Federal Reserve, Bank of England and European Central Bank are expected to hike rates at their upcoming meetings. The Fed meets May 2-3.

Oil investors are waiting for the Fed and other central banks to move next week to see the future direction of interest rates and the global economy, said Satoru Yoshida, commodities analyst at Rakuten Securities.

“The market is quiet on a mix of bullish and bearish economic data and as a rebound in the global stock market brought investors some relief,” referring to Thursday’s modest recovery in oil prices.

US stocks closed higher on Thursday as strong gains helped investors overlook signs of economic weakness.

On the supply side, Russian Deputy Prime Minister Alexander Novak said Thursday the OPEC+ group sees no need for further production cuts despite lower-than-expected Chinese demand, but the organization can adjust policy at any time if necessary.

The story goes on

The Organization of the Petroleum Exporting Countries (OPEC) and its allies including Russia, known as OPEC+, this month announced a combined production cut of around 1.16 million barrels a day, sending oil prices higher.

The market rallied following the OPEC+ announcement but weakened in response to concerns about a recession and the impact it would have on demand.

Earlier this week, data from the Energy Information Administration showed that US crude oil and gasoline inventories fell more-than-expected last week as fuel demand picked up ahead of the summer peak.

“Given a warning from Russia that OPEC+ could adjust policy if necessary, and a larger-than-expected fall in US oil inventories ahead of the driving season, oil prices are likely to rise in the week ahead,” he said, forecasting WTI to head towards 80 $ per barrel.

(Reporting by Yuka Obayashi; Editing by Christian Schmollinger)