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EIA: U.S. crude output in March at highest level in 2024

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U.S. inflation tracks sideways in April

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OPEC+ eyes deal to extend production cuts, sources say

By Nicole Jao

NEW YORK, May 31 (Reuters) - Oil prices fell on Friday

and were set for a weekly loss as investors awaited an OPEC+

meeting on Sunday that will determine the fate of the producer

group's output cuts.

Brent futures for July delivery were down 32 cents,

or 0.4%, to $81.54 a barrel by 11:53 a.m. EDT (1553 GMT), while

the more liquid August contract was down 99 cents, or

1.2%, at $80.89. U.S. West Texas Intermediate (WTI) crude

futures fell $1.11, or 1.4%, at $76.8.

Brent is on track for a weekly decline of 0.7%, with WTI

on course for a 1.2% loss.

"It's the trepidation ahead of the OPEC meeting over the

weekend," said Matt Smith, lead analyst at Kpler, referencing

the potential for the group to do something unexpected. "It's

widely expected that they'll roll over the cuts," he added.

Markets are awaiting the OPEC+ meeting on Sunday, with

the producer group working on a complex deal that would allow it

to extend some of its deep oil production cuts into 2025, three

sources familiar with OPEC+ discussions told Reuters.

"OPEC+ is likely to stay in pre-emptive market management

mode to keep contango away and prevent oil prices from

spiralling to higher levels," said Mukesh Sahdev, an analyst at

Rystad Energy.

U.S. crude production rose in March to its highest level

this year,

data

from the U.S. Energy Information Administration (EIA)

showed on Friday, while fuel product supplied, a proxy for

demand, fell 0.4% to 19.9 million barrels per day.

The oil market has been under pressure in recent weeks over

the prospect of borrowing costs staying higher for longer, which

ties down funds and can curb oil demand.

Both oil benchmarks were on course for their worst monthly

declines since December after dropping in the previous session

on a surprise build in U.S. fuel inventories.

"U.S. summer travel season kicked off with Memorial Day

weekend, with initial indications showing strong driving and

flying activity - but fuel use looks more muted, implying

efficiency gains," Citi analysts wrote in a note.

Oil prices rose briefly after U.S. government data on Friday

showed U.S. inflation tracked sideways in April, strengthening

traders' bets that the Fed would likely deliver a long-awaited

rate cut in September.

Euro zone inflation rose more than expected in May, Eurostat

data showed. The increase is unlikely to deter the European

Central Bank from cutting borrowing costs next week, but it

could slow or halt the rate cutting cycle in the coming months.​