Oil drops over 2% amid weak China demand, Fed Rate uncertainty
Shafaq News/ Oil prices settled down more than 2% on Friday asinvestors fretted about weaker Chinese demand and a potential slowing in thepace of U.S. Federal Reserve interest rate cuts.
Brent crude futures settled down $1.52, or 2.09%, to $71.04 abarrel. U.S. West Texas Intermediate crude futures (WTI) settled down $1.68, or2.45%, at $67.02.
For the week, Brent fell around 4%, while WTI declined around 5%.
China's oil refiners in October processed 4.6% less crude than ayear earlier because of plant closures and reduced operating rates at smallerindependent refiners, data from the National Bureau of Statistics showed onFriday.
The country's factory output growth slowed last month and demandwoes in its property sector showed few signs of abating, adding to investors'concerns over the economic health of the world's largest crude importer.
"The headwinds out of China are persisting, and whateverstimulus they put forward could be damaged by a new round of tariffs by theTrump administration," said John Kilduff, partner at Again Capital in NewYork.
U.S. President-elect Donald Trump has pledged to end China'smost-favored-nation trading status and impose tariffs on Chinese imports inexcess of 60% - much higher than those imposed during his first term.
Goldman Sachs Research economists have modestly lowered their 2025growth forecast for China, the bank said in a note, following on expectationsof significant tariff increases under Trump.
“However, we would likely make larger downgrades if the trade warwere to escalate further,” Goldman Sachs Research chief economist, Jan Hatziussaid in the note.
Oil prices also fell this week as major forecasters indicatedslowing global demand growth.
"Global oil demand is getting weaker," said InternationalEnergy Agency (IEA) Executive Director Fatih Birol on Friday at the COP29summit.
"We have been seeing this for some time and this is mainlydriven by the slowing Chinese economic growth and the increasing penetration ofelectric cars around the world."
The IEA forecasts global oil supply to exceed demand by more than 1million barrels per day in 2025 even if cuts remain in place from OPEC+.
OPEC, meanwhile, cut its forecast for global oil demand growth forthis year and 2025, highlighting weakness in China, India and other regions.
FED RATE CUT IN THE BALANCE
U.S. retail sales increased slightly more than expected in October,suggesting the economy kicked off the fourth quarter on a strong note.
"The economic data this morning was strong and notable so thatis keeping things somewhat stable with regard to what the U.S. demand pictureshould be," Again Capital's Kilduff said.
The data added to the debate among Federal Reserve policymakersover the pace and extent of interest rate cuts as investors further downgradedtheir expectations for a rate reduction at the central bank's December meeting.
Lower interest rates typically spur economic growth, aiding fueldemand.
Federal Reserve Bank of Boston President Susan Collins, however,did not rule out a December rate cut when speaking on Bloomberg's televisionchannel.
"Looking at those numbers, there is nothing forcing the Fed toget real crazy about it, I think the odds for a 25 basis rate cut for Decemberhave dropped to between high 50s-60%," said chief economist at MatadorEconomics, Tim Snyder.
"I wouldn't be surprised if we do not see anything inDecember, and have to wait and see how the year ends," Snyder added.
(REUTERS)
