SINGAPORE (Reuters) – Oil prices edged lower on Friday, set to post their first weekly fall in five weeks, after U.S. inventory data showed lacklustre fuel demand in the world’s largest oil consumer while worsening U.S.-China tensions weighed on global financial markets.
Brent crude slipped 43 cents, or 1.2%, to $34.86 a barrel by 0643 GMT and U.S. West Texas Intermediate (WTI) crude was at $33.14 a barrel, down 57 cents, or 1.7%.
“The rally needs a breather. It has been four weeks of gains and the market needs to buy time for downstream prices to catch up,” OCBC economist Howie Lee said.
“Beyond the short term, the bullish momentum still looks rather intact.”
Both contracts are headed for their biggest monthly gains in years as production cuts and optimism about demand recovery led by China supported prices, analysts said.
WTI is on track to rise 76% for May, its biggest monthly gain ever, while Brent has gained 38%, the strongest monthly rise since March 1999.
Thursday’s data from the Energy Information Administration showed that U.S. crude oil and distillate inventories rose sharply last week. Fuel demand remained slack even as various states lifted travel restrictions they had imposed to curb the coronavirus pandemic, analysts said.
Looking ahead, traders will be focusing on the outcome of talks on output cuts between the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, known as OPEC+, in the second week of June.
Saudi Arabia and some OPEC members are considering extending record production cuts of 9.7 million barrels per day beyond June, but have yet to win support from Russia.
Reporting by Florence Tan; Editing by Kenneth Maxwell and Christian Schmollinger