Oil prices steady as markets weigh Fed rate cut expectations, Chinese demand

HOUSTON: Oil prices settled little changed on Friday as markets weighed Chinese demand and interest rate-cut expectations after data showed cooling US inflation.

Brent crude futures closed up 6 cents, or 0.08%, at $72.94 a barrel. US West Texas Intermediate crude futures rose 8 cents, or 0.12%, at $69.46 per barrel.

Both benchmarks ended the week down about 2.5%. The US dollar retreated from a two-year high, but was heading for a third consecutive week of gains, after data showed cooling US inflation two days after the Federal Reserve cut interest rates but trimmed its outlook for rate cuts next year.

A weaker dollar makes oil cheaper for holders of other currencies, while rate cuts could boost oil demand. Inflation slowed in November, pushing Wall Street’s main indexes higher in volatile trading. “The fears over the Fed abandoning support for the market with its interest rate schemes have gone out the window,” said John Kilduff, partner at Again Capital in New York.

“There were concerns around the market about the demand outlook, especially as it relates to China, and then if we were going to lose the monetary support from the Fed, it was sort of a one-two punch,” Kilduff added.

Chinese state-owned refiner Sinopec said in its annual energy outlook on Thursday that China’s crude imports could peak as soon as 2025 and the country’s oil consumption would peak by 2027, as demand for diesel and gasoline weakens.

OPEC+ needed supply discipline to perk up prices and soothe jittery market nerves over continuous revisions of its demand outlook, said Emril Jamil, senior research specialist at LSEG.

OPEC+, the Organization of the Petroleum Exporting Countries and allied producers, recently cut its growth forecast for 2024 global oil demand for a fifth straight month.

JPMorgan sees the oil market moving from balance in 2024 to a surplus of 1.2 million barrels per day in 2025, as the bank forecasts non-OPEC+ supply increasing by 1.8 million barrels per day in 2025 and OPEC output remaining at current levels.

US President-elect Donald Trump said the European Union may face tariffs if the bloc does not cut its growing deficit with the US by making large oil and gas trades with the world’s largest economy.

In a move that could pare supply, G7 countries are considering ways to tighten the price cap on Russian oil, such as with an outright ban or by lowering the price threshold, Bloomberg reported on Thursday. Russia has circumvented the $60 per barrel cap imposed in 2022 following the invasion of Ukraine through the use of its “shadow fleet” of ships, which the EU and Britain have targeted with further sanctions in recent days.

Money managers raised their net long US crude futures and options positions in the week to Dec. 17, the US Commodity Futures Trading Commission (CFTC) said on Friday.