Oil set for weekly decline with Fed in no rush to cut interest rates

Oil prices fell on Friday and were on track for a weekly decline after the U.S. central bank indicated that interest rate cuts could be delayed by at least two more months.

Brent crude futures were down $1.35, or 1.6%, at $82.32 a barrel by 1313 GMT and U.S. West Texas Intermediate crude futures lost $1.35, or 1.7%, to $77.26.

Both benchmarks were poised to register weekly declines after two weeks of gains, but indications of healthy fuel demand and supply concerns could revive prices in the coming days.

U.S. Federal Reserve policymakers should delay interest rate cuts by at least another couple of months, Fed Governor Christopher Waller said on Thursday, which could slow economic growth and curb oil demand.

Some analysts, however, say demand has remained largely healthy despite the impact of high interest rates, including in the United States.

JPMorgan’s demand indicators are showing oil demand rising by 1.7 million barrels per day (bpd) month over month through Feb. 21, its analysts said in a note on Friday.

“This compares to a 1.6 million bbd increase observed during the prior week, likely benefiting from increased travel demand in China and Europe,” the analysts said.

The Fed has held its policy rate steady in a 5.25% to 5.5% range since last July. Minutes of its meeting last month show most central bankers were worried about moving too quickly to ease policy.

Waller also pushed back on the idea that the Fed risks sending the economy into recession if it waits too long to cut rates, saying the Fed can afford to “wait a little longer”.

Oil futures had settled higher on Thursday as hostilities continued in the Red Sea, with Iran-aligned Houthis continuing attacks near Yemen.

Meanwhile, Israeli Prime Minister Benjamin Netanyahu’s war cabinet has approved sending negotiators to truce talks taking place in Paris on Friday as pressure mounts, according to a source briefed on the matter and Israeli media.