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Investing.com– Oil prices notched a weekly gain Friday despite settling lower amid pressure from a rising dollar as a hotter-than-expected U.S. inflation data stoked fears of a more hawkish Federal Reserve at the central bank’s meeting next week.  

At 14:30 ET (13:30 GMT), fell 0.3% to $81.04 a barrel, while dropped 0.15% to $85.29 a barrel. 

Weekly gains likely on tighter supply outlook; oil rig counts continue to expand

Still, crude prices gained more than 3% this week, after earlier climbing to its highest levels since November last year, as signs of improving U.S. demand and tightening fuel markets spurred strong gains through the week.

A  bigger-than-expected draw in U.S. pointed to improving demand in the world’s largest fuel consumer, while the White House confirmed it was buying over 3 million barrels of oil to replenish the Strategic Petroleum Reserve.

In addition to the smaller U.S. inventories, debilitating Ukrainian attacks on a key Russian fuel refinery threatened to potentially disrupt fuel supplies in parts of Asia and Europe, presenting a tighter supply outlook for oil markets. 

On the demand front, the number of oil rigs operating in the U.S. rose by 6 to 510, the highest since Sept. 15, as refinery activity continues to recover. 

Strong dollar takes shine off wining week

Still, crude prices were pressured by a stronger , which rose sharply on Thursday after followed in coming in stronger than expected for February.

These reading, which came just days before a , ramped up fears that the central bank will keep interest rates higher for longer in 2024, boosting the greenback.

A strong dollar makes commodities, like crude, that are denominated in dollars more expensive for foreign buyers.  

Demand hopes buoyed by OPEC, IEA forecasts

Both the Organization of Petroleum Exporting Countries and the International Energy Administration forecast strong oil demand in 2024 and 2025, in separate monthly reports released this week.

The IEA in particular hiked its demand outlook for 2024 and said that fuel supplies were likely to tighten further, as disruptions in the Middle East continued.

But the IEA also warned that slowing economic growth across the globe still presented a headwind to oil demand, especially when factoring in concerns over higher for longer interest rates in 2024. 

(Peter Nurse, Ambar Warrick contributed to this article.)