By Georgina McCartney
HOUSTON (Reuters) -Oil prices edged higher on Friday, helped by tensions in the Middle East, but a strong dollar and U.S. inflation data have dashed hopes that the Federal Reserve would cut rates quickly, putting a ceiling on prices would get.
futures rose 49 cents, or 0.55%, to $89.50 a barrel. U.S. West Texas Intermediate crude futures rose 28 cents, or 0.34%, to $83.85 a barrel.
Supply concerns supported prices as tensions persist in the Middle East.
Benjamin Netanyahu, Israel’s prime minister, said that any rulings by the International Criminal Court, which is investigating Hamas’ October 7 attacks on Israel and Israel’s military assault on Gaza, would not affect Israel’s actions but “a would set a dangerous precedent.”
As tensions escalate, Israel’s military said Friday its air force struck in Lebanon’s West Bekaa district and killed a militant carrying out attacks on Israel.
Israel stepped up airstrikes on Rafah on Thursday after saying it would evacuate civilians from the southern Gaza city and launch an all-out assault, despite allies’ warnings that it could cause mass casualties.
“Israel is not afraid to make a living on its own if necessary. People are watching to see what happens between Netanyahu and Biden,” said Tim Snyder, chief economist at Matador Economics.
“The geopolitical element is not over yet, the proxy battles currently underway will continue,” and this still provides support and helps offset negative pressure from inflation numbers, Snyder added.
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Meanwhile, macroeconomic pressures are limiting gains after data released on Friday showed rising inflation.
In the 12 months to March, US inflation rose 2.7%, after rising 2.5% in February. Last month’s increase was largely in line with economists’ expectations.
The Fed has an inflation target of 2%. The US central bank is expected to leave interest rates unchanged at its policy meeting next week.
“This morning’s economic data was enough for market participants to conclude that the Fed won’t be cutting rates any time soon,” said John Kilduff, partner at Again Capital LLC.
“Geopolitical unrest in the market is keeping us afloat. These two competing forces should keep us in check,” Kilduff added.
U.S. Treasury Secretary Janet Yellen told Reuters on Thursday that U.S. GDP growth for the first quarter could be revised higher and inflation will ease after a series of “peculiar” factors left the economy at its weakest level in nearly held for two years.
US economic growth was probably stronger than the weaker quarterly figures suggest, Yellen said. Oil prices have turned around since Yellen’s comments and Friday’s inflation data release.
Meanwhile, the dollar rose to a new 34-year high against the yen on Friday, partly supported by US inflation data.
“The strength of the dollar is helping to exert negative pressure today,” Kilduff said.
Elsewhere, OPEC Secretary General Haitham Al Ghais said in an opinion article that the end of oil production is not yet in sight because the pace of energy demand growth means alternatives cannot replace it at the scale needed. and the focus should be on reducing oil production. emissions, not oil consumption.
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