Oil prices head for weekly fall after volatile week

By Stephanie Kelly

NEW YORK (Reuters) -Oil prices fell on Friday, wiping out gains from the previous session, on worries that the U.S. Federal Reserve will accelerate plans to boost interest rates to tame inflation.

Brent crude futures fell 47 cents to $82.40 a barrel by 11:13 a.m. EST (1613 GMT). U.S. West Texas Intermediate (WTI) crude fell 47 cents to $81.12 a barrel.

Both benchmarks were on track for a third consecutive weekly decline, hit by a strengthening dollar and speculation the Biden Administration might release oil from the U.S. Strategic Petroleum Reserve to cool prices. Brent was set to end the week down 0.5%, while WTI was on track for a 0.2% decline.

“This week has been a good reminder for oil markets that prices are not only affected by the supply-demand trajectory, but also from monetary policy forecasts and by forms of government intervention,” said Louise Dickson, senior oil markets analyst at Rystad Energy.

“Higher interest rates would provide even further support to the dollar and even more downward pressure on oil prices”.

This week, U.S. Energy Secretary Jennifer Granholm said President Joe Biden could act as soon as this week to address soaring gasoline prices.

“We believe that whatever the announcement is will only have a short-term impact on price, but because of the uncertainty the market is pulling back a little bit,” said Phil Flynn, senior analyst at Price Futures Group.

Though there are positive signs on the demand side, with air travel picking up rapidly, tighter monetary and fiscal policy and the looming northern hemisphere winter will act as a dampener.

The Organization of the Petroleum Exporting Countries (OPEC) on Thursday cut its world oil demand forecast for the fourth quarter by 330,000 barrels per day (bpd) from last month’s forecast as high energy prices hampered economic recovery from the COVID-19 pandemic.

OPEC, Russia and allies, together known as OPEC+, agreed last week to stick to plans to add 400,000 bpd to the market each month.

“The oil market is sleepwalking into a supply surplus,” said Stephen Brennock of oil broker PVM. “OPEC and its allies will at the very least need to put a pause on the easing of their supply curbs in the new year. Inaction will result in global oil stocks swelling once again.”

(Additional reporting by Noah Browning in London, Sonali Paul in Melbourne and Koustav Samanta in Singapore; Editing by David Goodman, Hugh Lawson and David Gregorio)

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