West Texas Intermediate (WTI), futures on NYMEX, look set to close the week on a bearish note. The Oil price has extended its losing spree for the fifth trading session on Friday. The black gold has remained under pressure for the entire week as Federal Reserve (Fed) policymakers maintain a hawkish guidance on interest rates despite an expected decline in the United States Consumer Price Index (CPI) report for April.
Fed officials are uncertain about a resumption in progress in the disinflation process, given the strength in the labor market. Policymakers are clear that rate cuts will be considered only if they get greater confidence that inflation will sustainably return to the desired rate of 2%.
The Federal Open Market Committee (FOMC) minutes for the May meeting indicated that a few policymakers have supported for tightening the monetary policy further to be sure that price stability will be achieved. While Fed Chair Jerome Powell and the majority of other policymakers said that more rate hikes are unlikely.
The Fed's hawkish outlook on interest rates is unfavorable for the Oil price. Higher interest rates reduce the flow of liquidity into the economy, which negatively influences consumer spending and factor activities and eventually impacts overall oil demand.
The next trigger for the Oil price will be the OPEC meeting scheduled for June 1, during which members will discuss the supply policy. In the last meeting on April 13, oil-rich nations made no change in the current voluntary oil output cut, which is 2.2 million barrels per day.