Oil prices fall as heavy weekly losses loom due to bets on tighter supply, hit by Investing.com

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Investing.com — Oil prices fell Friday, remaining on track for steep losses this week even as the dollar weakened after a weaker-than-expected U.S. jobs report, while data pointing to rising U.S. supply fueled bets on tighter markets kept in check.

At 2:10 PM ET (18:10 GMT), the price fell 0.6% to $84.20 per barrel, while it rose 0.6% to $79.44 per barrel. Oil prices are trading near their weakest levels in seven weeks and are expected to fall between 5% and 6% this week.

The weaker dollar fails to turn the negative tide now crude set for big weekly losses

The dollar fell as hopes for rate cuts were fueled by data showing the tight US labor market was cooling after job growth and wages fell in April.

“Our forecast remains three 25 basis point cuts this year, starting in July, but we have made clear that the path to cuts in July has narrowed following the reinflation in the 1Q24 data,” Morgan Stanley said in a statement note from Friday.

Because oil is priced in dollars, a weaker dollar tends to boost demand for non-dollar investors. Despite the dollar’s weakness, this provided little comfort for oil prices as most of the damage came earlier this week following an unexpected US surge and data showing increased US production.

This was accompanied by decreasing fears of supply disruptions in the Middle East, while Israel and Hamas continued negotiations on a possible ceasefire.

Baker Hughes’ drilling rig count drops below 500

Oilfield services company Baker Hughes Co (NYSE:BKR) reported that the weekly U.S. rig count, a leading indicator of future production, rose by 499 from 506, pointing to weaker drilling activity even as the U.S. summer drilling season approaches is.

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But the drop in rig numbers just as domestic production is rising suggests drillers are squeezing more and more from existing wells.

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OPEC+ could extend production cuts

Still, crude found some relief from a softer Friday as the dollar retreated ahead of nonfarm payrolls data.

Also helping set the tone was a report from Reuters that the Organization of the Petroleum Exporting Countries and allies, a group known as OPEC+, could potentially maintain their current output cut of 2.2 million barrels per day beyond the end-June deadline , especially if the question does not answer.

But cartel members have yet to begin formal talks on the issue. Still, extensive production cuts by the cartel could usher in tighter markets later in 2024.

Adnoc, the UAE’s national oil company, has increased its production capacity by 200,000 barrels per day to 4.85 million barrels per day, leaving the producer with a spare capacity of more than 1.7 million barrels per day, after adding slightly more in April than 3.1 million barrels per day.

“This could lead to the UAE pushing for a higher baseline when OPEC+ discusses its production policy for the second half of 2024,” ING added.

(Peter Nurse, Ambar Warrick contributed to this article.)

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