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Oil prices rise 1% after a downbeat week

Oil prices

The Brent crude July contract settled $1, or 1.2% higher at $83.12 a barrel, and the more active August contract gained $1.04 to $82.88

Oil prices rose more than 1% in thin trade amid public holidays in Britain and the US after a downbeat week characterised by the outlook for U.S. interest rates in the face of stubbornly high inflation.

The Brent crude July contract settled $1, or 1.2% higher at $83.12 a barrel. The more active August contract gained $1.04 to $82.88.

U.S. WTI crude futures were up 93 cents at $78.65.

Brent shed around 2% last week and West Texas Intermediate around 3% after Fed minutes showed some officials would be willing to hike interest rates further if it were deemed necessary to control sticky inflation.

Sentiment in the oil complex has been skittish as investors are constantly recalibrating expectations for the Fed’s monetary policy trajectory, according to Vandana Hari, founder of oil market analysis provider Vanda Insights.

Recent data emanating from Western countries has shifted rate cut expectations.

On Monday, key ECB policymakers said the bank has room to cut interest rates as inflation slows but must take its time in easing policy.

Figures for inflation in the euro zone are due Friday and economists believe an expected rise up to 2.5% should not stop the European Central Bank from easing policy next week.

The U.S. PCE index expected this week will be in the spotlight for further signals about interest rate policy.

German inflation data on Wednesday and euro zone numbers on Friday will also be watched for signs of a European rate cut that traders have pencilled in for next week.

Focus will also be on the upcoming OPEC+ meeting. The meeting is to take place online on June 2.

An extension to output cuts of 2.2 million bpd is the likely outcome, OPEC+ sources have said this month.

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