Oil heads for weekly loss on rate hike worries, ample supply

Oil fell about 2% on Friday and was heading for a weekly decline, pressured by concerns of more U.S. Federal Reserve interest rate hikes that could weigh on demand, and signs of ample supply.

Two Fed officials on Thursday warned additional hikes in borrowing costs are essential to lower inflation to desired levels. Heightened rate hike expectations boosted the U.S. dollar, making oil more expensive for holders of other currencies.

Brent crude futures were down $1.59, or 1.9%, to $83.55 a barrel by 0901 GMT, while West Texas Intermediate (WTI) U.S. crude fell $1.57, or 2%, to $76.92.

Both benchmarks were heading for a weekly decline of more than 3%.

"Rate hike jitters have returned with a vengeance," said Stephen Brennock of oil broker PVM.

Various signs of ample supply also weighed on the market.

Russian oil producers expect to maintain current volumes of crude oil exports, despite the government's plan to cut oil output in March, the Vedomosti newspaper said on Friday, citing sources familiar with companies' plans.

The latest snapshot of U.S. supplies, released on Wednesday, showed crude inventories in the week to Feb. 10 rose by 16.3 million barrels to 471.4 million barrels, their highest level since June 2021.

Some support came from moves this week by the International Energy Agency and the Organization of the Petroleum Exporting Countries to raise their forecasts for global oil demand growth this year, citing expectations for more Chinese demand.

And Saudi Arabia's energy minister said the current deal by OPEC+, which groups OPEC producers with Russia and others, to cut oil output targets by 2 million barrels per day, would be locked in until the end of the year, adding he remained cautious on Chinese demand.