Oil prices retreated on Friday after hitting their highest levels since November 2023 a day earlier, but still posted weekly gains on supply tightness worries.
On Friday, Brent crude futures for May 2024 delivery closed 0.09% lower at $85.34 per barrel, while U.S. West Texas Intermediate (WTI) crude futures for April 2024 settlement fell 22 cents, or 0.27%, to $81.04 per barrel.
Despite the daily declines, Brent rose 4% this week, and WTI gained 3.88%.
The upward momentum in oil prices was fueled by expectations of increased demand from U.S. refiners completing their turnaround maintenance plans.
"Supplies are getting tighter" for motor fuels, said Phil Flynn, an analyst at Price Futures Group. "Prices are at risk of going higher."
However, "there are concerns the U.S. Federal Reserve won't be able to cut interest rates" as inflation remains above the central bank's 2% target, Flynn added.
Interest rate cuts are seen as a potential boon for demand growth in the U.S.
Prices have been trapped in the $80 to $84 per barrel range for the past month. Then, on Thursday, the International Energy Agency (IEA) raised its 2024 oil demand outlook for the fourth time since November due to Houthi attacks disrupting Red Sea shipments.
Global oil demand will rise by 1.3 million barrels per day (bpd) in 2024, the IEA said in its latest report, up 110,000 bpd from last month's forecast.
The IEA expects a slight supply deficit this year if OPEC+ members maintain their production cuts, having previously projected a surplus.
U.S. energy firms added the most oil and natural gas rigs in a week since September, with the oil rig count also rising to its highest in six months, energy services firm Baker Hughes said in its closely watched report on Friday.
The oil and gas rig count, an early indicator of future output, rose by seven to 629 in the week to March 15.
Baker Hughes said the oil rig count rose by six to 510 this week, its highest since September, while the gas rig count increased by one to 116.
The weekly increase occurred despite the U.S. dollar strengthening at its fastest pace in eight weeks. A stronger greenback makes oil more expensive for holders of other currencies.
Also supporting oil prices was a Ukrainian attack on a Russian oil refinery, causing a fire at Rosneft's largest refinery in one of the most serious attacks on Russia's energy sector in recent months.
"We continue to march forward," said John Kilduff, partner at Again Capital LLC, about Friday's activity.
U.S. crude oil stocks unexpectedly fell last week as refiners increased processing while gasoline inventories declined as demand rose, the Energy Information Administration (EIA) said on Wednesday.
Lower interest rates reduce borrowing costs for consumers, which could boost economic growth and oil demand.
In the U.S., some signs of slowing economic activity are seen as unlikely to prompt the Federal Reserve to start cutting interest rates before June as other data on Thursday showed producer prices rose more than expected last month.