Oil prices retreated on Friday after reaching $85 per barrel the previous day for the first time since November 2023, but benchmark crude grades still posted solid weekly gains.
On Friday (March 15th), Brent crude futures for May 2024 delivery closed 0.09% lower at $85.34 per barrel. U.S. West Texas Intermediate (WTI) crude futures for April 2024 settlement fell 22 cents, or 0.27%, to $81.04 per barrel.
Despite the daily dip, Brent crude gained 4% this week, while WTI rose 3.88%.
The sentiment buoying oil prices stemmed from the potential for increased demand as U.S. refineries complete maintenance turnarounds.
"Supplies are getting tighter" for motor fuels, said Phil Flynn, an analyst at Price Futures Group. "Prices are at risk of going higher."
However, "there are concerns the U.S. Federal Reserve won't be able to cut interest rates" as inflation remains above the central bank's 2% target, Flynn added.
Lower interest rates are seen as a boon for demand growth in the U.S.
Prices have been range-bound between $80 and $84 per barrel for the past month. Then, on Thursday, the International Energy Agency (IEA) raised its 2024 oil demand outlook for the fourth time since November due to Houthi attacks disrupting Red Sea shipments.
Global oil demand will rise by 1.3 million barrels per day (bpd) in 2024, the IEA said in its latest report, up 110,000 bpd from last month's forecast.
The IEA expects a slight supply deficit this year if OPEC+ members maintain their production cuts after previously forecasting a surplus.
U.S. energy firms this week added the most oil and natural gas rigs in a week since September, with the oil rig count also rising to its highest level in six months, according to the closely-followed report from energy services firm Baker Hughes on Friday.
The oil and gas rig count, an early indicator of future output, rose by seven to 629 rigs in the week ended March 15.
Baker Hughes said the oil rig count rose by six to 510 this week, its highest since September, while the gas rig count increased by one to 116.
The weekly increase came despite the U.S. dollar strengthening at its fastest pace in eight weeks. A stronger greenback makes crude more expensive for holders of other currencies.
Also supporting oil prices was a Ukrainian attack on a Russian refinery, causing a fire at Rosneft's largest refinery in one of the most serious strikes on Russia's energy sector in recent months.
"We're continuing to grind higher," said John Kilduff, a partner at Again Capital LLC, about Friday's action.
U.S. crude inventories unexpectedly fell last week as refiners boosted processing while gasoline stocks dropped as demand increased, the Energy Information Administration (EIA) said on Wednesday.
Lower interest rates reduce consumer borrowing costs, which could boost economic growth and oil demand.
In the U.S., some signs of slowing economic activity were viewed as unlikely to prompt the Federal Reserve to start cutting rates before June as other data on Thursday showed producer prices rose more than expected last month.