A section of the BP Eastern Trough Area Project oil platform is seen in the North Sea, about 100 miles east of Aberdeen in Scotland on February 24, 2014. Picture: REUTERS/ANDY BUCHANAN
A section of the BP Eastern Trough Area Project oil platform is seen in the North Sea, about 100 miles east of Aberdeen in Scotland on February 24, 2014. Picture: REUTERS/ANDY BUCHANAN

Melbourne — Oil prices drifted lower on Friday, wiping out gains from the previous session, as the dollar continued to rise on bets the US central bank will bring forward plans to raise rates to tame inflation.

US West Texas Intermediate (WTI) crude futures fell 26c, or 0.3%, to $81.33 a barrel at 1.28am GMT, reversing Thursday’s 25c gain.

Brent crude futures fell 25c, or 0.3%, to $82.62 a barrel, erasing Thursday’s gain.

Both contracts were poised to end the week roughly unchanged after sharp moves up and down, driven by a soaring dollar and speculation on whether the Biden administration might release oil from the US Strategic Petroleum Reserve to cool prices.

“The market is in a finely balanced situation,” said Westpac senior economist Justin Smirk.

While the market is tightly supplied, he said the bigger issue is the change in the demand dynamic, as the market moves away from a strong recovery driven by a revival in demand for goods — which has stoked energy demand — towards a recovery in demand for services.

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

Opec on Thursday cut its world oil demand forecast for the fourth quarter by 330,000 barrels per day from last month's forecast, as high energy prices curb the recovery from Covid-19.

National Australia Bank commodities analyst Baden Moore said he expects the oil market to remain tight into the third quarter of 2022 as demand continues to recover.

“Opec+ has been very canny in its management of global supply as demand recovers from the pandemic, and the group remains well positioned from this perspective,” Moore said.

Opec, Russia and allies, together called Opec+, agreed last week to stick to plans to add 400,000 barrels per day to the market each month.

Reuters

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