Oil futures closed slightly lower on Friday, with investors weighing the impact of a weak consumer sentiment report against growing expectations of a Federal Reserve rate cut in September. Brent crude futures settled at $85.03 a barrel, down 37 cents, while US West Texas Intermediate crude futures fell 41 cents to $82.21.
Despite a four-week rally, Brent futures saw a weekly decline of over 1.7%, while WTI futures fell by 1.1%. The University of Michigan’s consumer sentiment index dropped to an eight-month low in July, indicating potential weakness in the US economy. However, investors remain optimistic about the Fed’s anticipated rate cut, which could boost economic growth and fuel consumption.
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Meanwhile, US gasoline demand reached its highest point since 2019 for the week that included Independence Day, leading to strong refinery activity and a surge in crude oil consumption. Jet fuel demand also saw its highest four-week average since January 2020. These positive factors are being countered by concerns about a decline in Chinese oil imports, which fell 11% year-over-year in June.
The US active oil rig count, an indicator of future output, dropped to its lowest level since December 2021, suggesting potential production constraints. Despite the price dip, money managers increased their net long positions in US crude futures and options, indicating a continued bullish sentiment. The oil market continues to grapple with a complex mix of factors, creating a volatile environment.