Oil prices fell in Asian trading on Friday, heading for a second consecutive weekly decline. Concerns about global demand overshadowed falling U.S. crude inventories and increasing chances of a September interest rate cut by the Federal Reserve.
Early on Friday, the U.S. benchmark, WTI Crude, dropped by 0.6%, trading at around $82.30. Meanwhile, Brent Crude, the international benchmark, fell by 0.56% to $84.63. Both benchmarks were on track for a weekly decline of about 0.3%.
Prices had risen on Wednesday and early Thursday, driven by a larger-than-expected drop in U.S. crude inventories reported by the EIA on Wednesday morning. The EIA’s weekly report showed a 4.9 million barrel draw in commercial crude stocks for the week ending July 12, surpassing expectations.
However, the impact of the U.S. crude stock draw faded after a day. This was due to China’s leadership party plenum failing to convince markets that significant stimulus measures would be employed to revive the economy, which grew slower than expected in the second quarter.
Observers noted that the Communist Party’s Central Committee meeting this week did not address urgent economic issues. Its final press release was vague and filled with clichés.
“It does not make macroeconomic adjustments at all but is like a philosophical article, which is basically a cliché,” said Shi He-ling, an associate professor of economics at Monash Business School in Australia, to VOA.
Oil prices have been under pressure due to concerns about China’s oil demand and the trajectory of its economic growth. “The impact of Wednesday’s surprise data showing a weekly plunge in U.S. crude inventory has faded, and attention has shifted back to signs of tepid oil appetite across the globe, especially in Asia, which dominates demand growth,” Vanda Insights stated on Friday.
Supporting oil prices this week were comments from Fed Chair Jerome Powell. He indicated that recent inflation data “add somewhat to confidence” that policymakers are making progress in curbing inflation. This has given the market hope for a possible rate cut in September.
Additionally, wildfires in Canada threatening oil sands production provided some support to prices. This week, MEG Energy began evacuating non-essential personnel from its Christina Lake Regional Project (CLRP) due to nearby wildfires.