Investing.com– Oil prices fell on Friday as traders locked in profits after strong gains this week, while a recovery in the dollar, on the back of strong U.S. economic data, also weighed on crude markets.
Crude prices had surged to April peaks on Thursday after data showed that the U.S. in the second quarter, driving down fears of a recession that could potentially dent oil demand this year.
The data also came amid increasing signs of tightness in the oil market, as the effects of production cuts by Saudi Arabia and Russia began to be felt.
But the strong U.S. data boosted the , amid bets that the Federal Reserve will now have enough economic headroom to keep raising interest rates. This notion saw investors lock-in some profits in oil prices, although they were still headed for strong weekly gains.
fell 0.5% to $83.30 a barrel, while fell 0.5% to $79.66 a barrel by 21:00 (01:00 GMT). Both contracts were set to add between 2.5% and 3.5% this week- their fifth straight positive week.
Stronger dollar pressures oil prices
The dollar jumped 0.6% against a basket of currencies on Thursday, rebounding sharply from recent losses on signs of resilience in the U.S. economy. Strength in the dollar usually dents commodities priced in the greenback.
The dollar was also supported by increased buying after the signaled a potential end to its rate hike cycle, which diminished the appeal of the euro.
Strong U.S. economic data saw investors pricing in the possibility of at least , after the central bank this week and kept the door open for more hikes.
Higher oil prices also factor into stickier inflation, which could keep the Fed hawkish in the coming months.
Tightening supply, stronger demand to keep oil buoyed
But despite fears of tighter U.S. monetary policy, the outlook for oil prices was buoyed by signs of tightening supplies, as recent production cuts by Russia and Saudi Arabia began to take effect.
Reports suggested on Friday that Saudi Arabia’s 1 million barrel per day cut could extend until end-September. This helped oil markets largely look past data showing a smaller-than-expected draw in , despite the onset of the demand-heavy summer season.
Markets were also betting that more stimulus measures in world no.1 crude importer China will drive up demand this year.
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