HOUSTON (Reuters) – Oil prices ended the day little changed on Friday as markets weighed the impact of Chinese demand and expectations of U.S. interest rate cuts. The move came after data showed a slowdown in U.S. inflation.
Brent crude futures closed up by 6 cents, or 0.08%, at $72.94 per barrel. U.S. West Texas Intermediate (WTI) crude futures rose by 8 cents, or 0.12%, to settle at $69.46 per barrel.
Despite the small gains, both oil benchmarks ended the week down about 2.5%.
The U.S. dollar retreated from a two-year high but was still on track to gain for a third consecutive week. This came after data revealed a slowdown in U.S. inflation, which followed a Federal Reserve decision to cut interest rates while lowering its outlook for future rate cuts.
A weaker dollar generally makes oil more affordable for buyers holding other currencies. Additionally, rate cuts could stimulate oil demand.
In November, inflation slowed, helping Wall Street’s main stock indexes climb, despite volatile trading.
“The concerns that the Fed would stop supporting the market through interest rate changes have largely faded,” said John Kilduff, partner at Again Capital in New York. “Markets were worried about demand, especially from China. When combined with fears of losing Fed support, it created a double challenge.”
In its annual energy outlook, Chinese state-owned refiner Sinopec predicted that China’s oil consumption would peak by 2027, as demand for diesel and gasoline weakens.
Emril Jamil, a senior research specialist at LSEG, said OPEC+ would need to maintain supply discipline to boost oil prices and ease market concerns over continued changes to the demand outlook.
OPEC+, a group of major oil producers including the Organization of the Petroleum Exporting Countries (OPEC) and allied nations, recently lowered its global oil demand growth forecast for 2024 for the fifth consecutive month.
JPMorgan forecast the oil market would shift from balance in 2024 to a surplus of 1.2 million barrels per day in 2025. The bank expects non-OPEC+ supply to grow by 1.8 million barrels per day in 2025, while OPEC production remains unchanged.
In other news, U.S. President-elect Donald Trump warned that the European Union could face tariffs if it does not reduce its growing trade deficit with the U.S. This could involve larger oil and gas transactions with the U.S.
Meanwhile, the G7 countries are reportedly considering tightening the price cap on Russian oil. This could include banning the oil or lowering the price threshold, according to a Bloomberg report. Russia has bypassed the $60 per barrel cap set in 2022, following the invasion of Ukraine, by using a “shadow fleet” of ships, which the EU and the UK have recently targeted with additional sanctions.
Lastly, data from the U.S. Commodity Futures Trading Commission (CFTC) revealed that money managers increased their net long positions in U.S. crude futures and options for the week ending December 17.
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