Oil extends losses around three-month lows

LONDON, May 24 (Reuters) – Oil prices extended losses on Friday, pressured by lingering concerns that sticky inflation could prolong higher interest rates and curb fuel demand.

Brent crude futures fell by 58 cents, or 0.71%, to $80.78 a barrel by 0952 GMT. U.S. West Texas Intermediate (WTI) crude futures were down 59 cents, or 0.77%, at $76.28.

Both benchmarks settled at multi-month lows on Thursday, with Brent closing at its weakest since Feb. 7 and U.S. crude at its lowest since Feb. 23.

The contracts were heading for weekly declines of about 4% and 5% respectively, with Brent set for a fifth consecutive daily decline for its longest losing streak of the year.

“The backdrop of potentially higher-for-longer rates weighed significantly on oil prices this week,” said Phillip Nova analyst Priyanka Sachdeva.

Minutes released on Wednesday from the Fed’s latest policy meeting showed policymakers were questioning whether interest rates are high enough to tame stubborn inflation.

Some officials said they would be willing to raise borrowing costs again if inflation surged. Fed Chair Jerome Powell and other policymakers, however, have since said they feel further increases are unlikely.

High interest rates increase the cost of borrowing, which can slow economic activity and dampen demand for oil.

“Macroeconomic developments have been failing to provide meaningful support for oil,” PVM analyst Tamas Varga said. “It is a fair bet that rate cuts are slipping away.”

Investors will be turning their attention to a June 2 online meeting of the OPEC+ producer group comprising the Organization of the Petroleum Exporting Countries and its allies to discuss whether to extend voluntary oil output cuts of 2.2 million barrels per day.

“After the OPEC+ meeting the market is likely to increasingly focus on demand again. The upcoming Memorial Day weekend marks the start of the summer driving season in the U.S.,” said Commerzbank analyst Barbara Lambrecht.

U.S. gasoline product supplied, a proxy for demand, reached its highest level since November in the week to May 17, the Energy Information Administration (EIA) said on Wednesday.