By Emily Chow
BEIJING (Reuters) – Oil prices fell on Friday as high U.S. inflation stoked concerns about aggressive interest rate hikes and investors await the outcome of U.S.-Iranian talks that could lead to a hike in world crude oil supply.
Brent crude futures fell 25 cents, or 0.3%, to $91.16 a barrel at 0345 GMT, while US West Texas Intermediate crude fell 15 cents, or 0.2% , at $89.73 a barrel.
Benchmark oil prices are also in line for their first weekly decline after seven straight weekly gains, although both contracts previously hit a seven-year high.
“Yesterday’s inflation figure likely puts more pressure on the US Fed to act more aggressively with rate hikes. This expectation weighs somewhat on oil and the broader commodity complex” , said Warren Patterson, head of commodities research at ING.
“Additionally, the Iranian nuclear talks appear to be progressing, which is another factor holding down prices.”
St. Louis Federal Reserve Chairman James Bullard had said he wanted a full percentage point hike in interest rates by July 1, following the release of data on the inflation in the United States, which experienced its largest annual increase in 40 years.
Investors are also eyeing indirect talks between the United States and Iran to revive a nuclear deal, which resumed this week after a 10-day hiatus. A deal could see the lifting of sanctions on Iranian oil and ease the global supply squeeze.
White House spokeswoman Jen Psaki said the talks had “reached an urgent point” and that an “agreement that addresses the fundamental concerns of all parties is within sight.”
Rising crude prices have finally petered out as optimism grows that Iran nuclear deal talks are heading in the right direction and the dollar is recovering as currency markets begin to price a oversized Fed hike,” said Edward Moya, senior market analyst. at the OANDA brokerage.
“The oil market is still very tight, but the exhaustion from rising crude prices has set in. If the dollar continues to rally, oil prices could continue to fall.”
A tight supply was seen in crude oil inventories in the United States, which unexpectedly fell by 4.8 million barrels in the week of February 4 to 410.4 million barrels, the overall demand for refined products at an all-time high, the Energy Information Administration said. This compares to an analyst forecast of a rise of 369,000 barrels.
Meanwhile, the Organization of the Petroleum Exporting Countries (OPEC) said global oil demand could rise even more strongly this year. The group forecasts a gain of 4.15 million barrels per day (bpd) this year, as the global economy shows a strong recovery from the pandemic.
(Reporting by Emily Chow; Editing by Sam Holmes)