Oil prices fell on Friday, extending recent losses. This was driven by unexpected builds in U.S. product inventories, which raised concerns about sluggish fuel demand. Signs of weakening business activity in top oil importer China also weighed on prices.
OPEC+ meeting in focus
The upcoming meeting of the Organization of the Petroleum Exporting Countries and allies (OPEC+) was also in focus. The cartel is likely to extend its ongoing production cuts past the June-end deadline.
Brent oil futures expiring in July dropped 0.3 percent to $81.61 per barrel. West Texas Intermediate (WTI) crude futures fell 0.4 percent to $77.64 per barrel. Both contracts were set to lose nearly 5 percent in May amid persistent worries over sluggish demand this year.
Inventory data raises demand concerns
U.S. oil inventories saw a bigger-than-expected draw of nearly 4.2 million barrels in the week to May 24, against expectations of a 1.6 million barrel decline. However, gasoline and distillate inventories grew more than expected, raising concerns about weakening fuel demand.
While travel demand is expected to increase in the coming summer months, it could grow less than anticipated. This is due to headwinds from high inflation, interest rates, and cooling economic growth.
Fears of slowing U.S. economic growth rose after revised GDP data showed weaker-than-expected growth in the first quarter.
China PMIs disappoint
In China, manufacturing and non-manufacturing PMI data disappointed, indicating cooling business activity. This added to concerns over sluggish oil demand in the world’s largest importer.
PCE data in focus
Upcoming U.S. PCE inflation data will be closely watched, as it could influence the Federal Reserve’s interest rate outlook. Fears of persistently high U.S. rates have weighed on oil prices, as they raise concerns about future economic activity and fuel demand.
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