Brent fell 6% from this week’s high over demand concerns, fall in geopolitical risk premium

Brent Crude oil fell over 6% from the highs seen early this week as concerns over demand and continuing higher interest rates took a toll on the commodity’s price.

Futures of Brent crude, the global benchmark, was trading at $84.27 per barrel on Friday as compared to the highs of $89.31 per barrel. West Texas Intermediate futures were trading at $79.14 per barrel against the highs of $83.90 per barrel seen earlier this week.

The US Federal Reserve maintained a status quo on the interest rates earlier this week. According to a media report, Fed Chair Jerome Powell pointed out that faster-than-expected price rises in three months will make it difficult for policymakers to be comfortable about inflation getting down to 2%. Higher interest rates can cause a drag on the economy and subsequently on the oil demand.

"Inflation is still too high," Powell said in a press conference, according to the report. “Further progress in bringing it down is not assured and the path forward is uncertain,” he said.

The market is now awaiting economic data from the US as well as indicators of future crude supply. On Friday, the US Bureau of Labor Statistics will come out with its monthly non-farm payroll report that reflects the strength of the job market — an important factor that the Fed takes into consideration.

Another factor that has aided in the dampening of oil prices is the decline in the geo-political premium as Israel and Hamas mull a temporary ceasefire and are scheduling talks. According to a media report, Hamas chief Ismail Haniyeh had a discussion about the ongoing Gaza ceasefire talks in separate phone calls with Egypt's intelligence chief Abbas Kamel and Qatar's Prime Minister and Foreign Minister Mohammed bin Abdulrahman Al Thani.

Oil traders will now be watching out for the next meeting of the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, including Russia on June 1 for any indication of an extension in oil output cuts.