Oil prices drop as rising inventories offset Russian output cuts

By Ron Bousso

LONDON (Reuters) -Oil prices fell below $82 a barrel on Friday as rising inventories in the United States and concerns over global economic activity offset the prospect of lower Russian exports.

Brent crude futures were down 57 cents, or 0.7%, at $81.64 a barrel by 1423 GMT, having risen by more than $1 earlier in the session.

West Texas Intermediate U.S. crude futures (WTI) were down 69 cents, or 0.9%, at $74.70.

On the anniversary of Russia's invasion of Ukraine, benchmark Brent crude was about 15% lower than a year earlier. It hit a 14-year high of nearly $128 a barrel on Mar. 8, 2022.

Both benchmarks rose about 2% in the previous session on Russia's plans to cut oil exports from its western ports by up to 25% in March, which exceeded its announced production cuts of 500,000 barrels per day.

But the market appeared to be well supplied with U.S. inventories at their highest since May 2021, according to data from the U.S. Energy Information Administration. [EIA/S]

Indications that Russian crude and refined products are accumulating on tankers floating at sea also indicated increasing supplies.

JP Morgan said in a note on Friday that it thinks short-term prices are more likely to drift lower towards the $70s than rise "as global growth headwinds strengthen and excess 'dark' inventory exacerbated by a flooding of Russian oil is worked off".

The bank also said it expects the Organization of the Petroleum Exporting Countries (OPEC) to cut production to limit oil price declines.

Oil prices were set for a second straight week of declines after the previous week's drop of about 4%, weighed also by concerns about rising interest rates that could strengthen the dollar and curb fuel demand.

Minutes of the latest U.S. Federal Reserve meeting indicated that a majority of officials remained hawkish on inflation and tight labour market conditions, signalling further monetary tightening.

The prospect of further interest rate hikes supported the dollar index, which was set for a fourth straight week of gains. The index is now up about 2.5% for the month. [FRX/]

A firm dollar makes commodities priced in the greenback more expensive for holders of other currencies.

(Reporting by Ron BoussoAdditional reporting by Andrew Hayley and Jeslyn LerhEditing by Sharon Singleton, Kirsten Donovan and David Goodman)