SINGAPORE: Oil prices fell on Friday as investors weighed signs demand in top crude importer China continues to underperform amid the country’s uneven economic recovery and expectations of fewer Federal Reserve rate cuts.
Brent crude futures dropped $0.95, or 1.31%, to $71.62 a barrel by 0825 GMT. U.S. West Texas Intermediate crude futures were down $0.9, or 1.3%, at $67.81.
For the week, Brent is set to fall 3.06% while WTI is set to decline 3.67%.
“The weakness in oil prices midday seems to reflect the cool-off in broader risk sentiments,” Yeap Jun Rong, market strategist at IG, said in an email, pointing to falling equity markets.
The prospect of higher supplies from the U.S. and OPEC+ along with doubts over China’s economic recovery also continue to be of concern, Yeap added.
China’s oil refiners in October processed 4.6% less crude than a year earlier, falling year-on-year for a seventh month, amid the closures of some plants and reduced operating rates at smaller independent refiners, data from the National Bureau of Statistics showed on Friday.
The decline in run rates occurred as China’s factory output growth slowed last month and demand woes in its property sector showed few signs of abating even though consumer spending increased, government data showed.
IG’s Yeap also pointed to comments from U.S. Federal Reserve Chair Jerome Powell on Thursday that the Fed does not need to rush to lower interest rates.
A slow down in expected interest rate cuts could curtail some economic growth which would limit fuel demand. That also supports a stronger U.S. dollar, which impacts buyers paying for dollar-denominated crude in different currencies.
Oil prices also fell this week as major forecasters indicated market fundamentals remained bearish.
The International Energy Agency forecast global oil supply will exceed demand in 2025 even if cuts remain in place from OPEC+, which includes the Organization of the Petroleum Exporting Countries and allies such as Russia, as rising production from the U.S. and other outside producers outpaces sluggish demand.
The Paris-based agency raised its 2024 demand growth forecast by 60,000 barrels per day to 920,000 bpd, and left its 2025 oil demand growth forecast little changed at 990,000 bpd.
OPEC this week cut its forecast for global oil demand growth for this year and 2025, highlighting weakness in China, India and other regions, marking the producer group’s fourth-consecutive downward revision to its 2024 outlook.
U.S. crude inventories last week rose by 2.1 million barrels, the Energy Information Administration (EIA) said on Thursday, much more than analysts’ expectations for a 750,000-barrel rise.
Gasoline stocks fell by 4.4 million barrels last week to the lowest since November 2022, the EIA said, compared with analysts’ expectations in a Reuters poll for a 600,000-barrel build. ?Distillate stockpiles, which include diesel and heating oil, also fell unexpectedly by 1.4 million barrels, the data showed.