By Alex Lawler
LONDON (Reuters) -Oil slipped on Friday and was heading for a second weekly decline as investors weighed the impact of sharp interest rate rises on energy consumption, offsetting hopes of higher Chinese demand and output cuts by OPEC and its allies.
To fight inflation, the U.S. Federal Reserve is trying to slow the economy and will keep raising its short-term rate target, Federal Reserve Bank of Philadelphia President Patrick Harker said on Thursday.
Brent crude slipped $1.16, or 1.3%, to $91.22 a barrel by 0821 GMT. U.S. West Texas Intermediate crude was down by 74 cents, or 0.9%, to $83.77.
“With several key Fed members taking turns at the hawk’s pulpit this week arguing for even higher interest rates, it blunted optimism from China’s reduced quarantine hopes,” Stephen Innes, managing director at SPI Asset Management said in a note.
“Everyone is pining for a China-reopening-driven commodity boost, but we are not there yet.”
Brent, which came close to its all-time high of $147 a barrel in March, is on track for a weekly drop of 0.4%, while U.S. crude was set to fall over 2%. It would be the second consecutive weekly drop for both benchmarks.
Oil gained a lift on Thursday after Bloomberg news reported that Beijing was considering cutting the quarantine period for visitors to seven days from 10 days. There has been no official confirmation from Beijing.
“The knee-jerk price action provided a useful glimpse of what to expect once more punitive restrictions are lifted,” said Stephen Brennock of oil broker PVM, of the market’s rally after the report.
China, the world’s largest crude importer, has stuck to strict COVID-19 curbs this year, weighing heavily on business and economic activity and lowering demand for fuel.
Oil gained support from a looming European Union ban on Russian oil, as well as the output cut agreed earlier this month by the Organization of the Petroleum Exporting Countries and allies including Russia, known as OPEC+.
(Additional reporting by Florence Tan and Emily Chow in Singapore; Editing by Elaine Hardcastle)