Oil extends decline on signs of weak fuel demand, strong dollar

Both benchmarks settled about $1 lower on Friday as Fed officials debated whether U.S. interest rates are high enough to bring inflation back to 2%.

Analysts expect the U.S. central bank to keep its policy rate at the current level for longer, supporting the . A strong greenback makes dollar-denominated oil more expensive for investors holding other currencies.

Oil prices also fell amid signs of weak demand, analysts said in a note, as U.S. gasoline and distillate inventories rose in the week of ahead of the start of the U.S. driving season.

Refiners globally are struggling with slumping profits for diesel as new refineries boost supplies and as mild weather in the northern hemisphere and slow economic activity eat into demand.

Still, the market remained supported by expectations that the and their allies, together known as OPEC+, could extend supply cuts into the second half of the year.

, the second-largest producer, is committed to voluntary oil production cuts agreed by and is keen to cooperate with member countries on efforts to achieve more stability in , its oil minister told the state news agency on Sunday.

The minister's comments followed his suggestion on Saturday that Iraq had made enough voluntary reductions and would not agree to any additional cuts proposed by the wider OPEC+ producer group at its meeting in early June.

Earlier this month, OPEC+ called out Iraq for pumping over its output quota by a cumulative 602,000 barrels per day in the first three months of 2024. The group said that Baghdad had agreed to compensate with additional production cuts over the rest of the year.

(Reporting by Florence Tan; Editing by Sonali Paul)