Oil prices fall due to increased supply and uncertainty over Fed rate cuts.
Lower interest rates can boost economic growth and oil demand.
Oil prices fell about 2% on Friday as investors weighed expectations of increased OPEC+ supply starting in October against diminished hopes for a significant interest rate cut in the U.S. next month, following data showing strong consumer spending.
October Brent crude futures, which expired on Friday, dropped $1.14, or 1.43%, to $78.80 per barrel, marking a 0.25% decline for the week and a 2.35% drop for the month.
U.S. West Texas Intermediate (WTI) futures fell $2.36, or 3.11%, to $73.55, with a 1.71% decrease for the week and a 5.6% drop in August.
The Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, are set to proceed with the planned increase in oil production starting in October. This decision, combined with production cuts promised by some members to offset excess output, is countering the impact of sluggish demand, according to six sources from the group who spoke to Reuters.
The headline that really hurt us today was OPEC+’s announcement to move forward with reducing production cuts. Meanwhile, investors reacted to new data showing that U.S. consumer spending increased solidly in July, suggesting that the economy remains on firmer ground at the start of the third quarter and arguing against a half-point interest rate cut by the Federal Reserve next month.
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