Oil sheds 3% in 5 days on US Fed rate cut outlook, weak Chinese demand; Brent slips below $73/bbl | Stock Market News

International crude oil prices settled little changed in the previous session after markets weighed weak Chinese demand and fewer interest rate-cut expectations by the US Federal Reserve after recent prints of US inflation.

Brent crude futures closed up six cents, or 0.08 per cent, to settle at $72.94 a barrel. US West Texas Intermediate crude futures rose eight cents, or 0.12 per cent, to settle at $69.46 per barrel. Both crude oil benchmarks ended the week down about 2.5. Back home, crude oil futures settled 0.1 per cent higher at ₹5,944 per barrel on the multi-commodity exchange (MCX).

Also Read: Morgan Stanley, HSBC slash crude oil supply forecast; Brent average pegged near $70 for 2025 after OPEC+ verdict

Brent shed 2.5%: What’s weighing on crude oil prices?

-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 US 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.

-Analysts say the fears over the US Fed abandoning support for the market with its interest rate schemes have gone out the window. 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 US Fed, it was sort of a one-two punch.

-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. This will result in weak Chinese imports next year.

Also Read: Shell, Norway’s Equinor to merge offshore assets for creating UK’s largest oil & gas firm in joint venture

-OPEC, the Organization of the Petroleum Exporting Countries and allied producers, recently cut its growth forecast for 2024 global oil demand for a fifth month. Analysts say OPEC needed supply discipline to perk up prices and soothe jittery market nerves over continuous revisions of its demand outlook

-JPMorgan sees the oil market moving from a balance in 2024 to a surplus of 1.2 million barrels per day in 2025. 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, in his latest attack, said the European Union (EU) 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.

-Bloomberg reported on Thursday that G7 countries are considering ways to tighten the price cap on Russian crude oil, such as an outright ban on imports or lowering the price threshold, in a move that could pare supply.

-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.

Also Read: Saudi Aramco to take on more debt, focus on dividend growth, says CFO Ziad Al-Murshed after slump in oil prices

Where are prices headed?

Rahul Kalantri, VP of Commodities, Mehta Equities Ltd, said, “Record strength in the dollar index after FOMC meeting outcomes and the US Fed hawkish guidance for 2025 rate cuts could restrict crude oil gains.”

“The US Fed guidance for 2025 rate cuts is reduced to 50 basis points from the November meeting of 100 basis points and could impact global oil demand. We expect crude oil prices to remain volatile. Crude oil has support at $69.05-68.60, and resistance is at $70.30-71.00. In INR crude oil has support at ₹5,940-5,880 while resistance at ₹6,060-6,140,” added Kalantri.

“Prices pulled back from their highs as the dollar surged to a two-year high of 108.3, following the release of the closely watched Fed dot plot projections, which indicated that several officials now expect fewer rate cuts next year. Fed officials now anticipate it will take longer for inflation to reach their two per cent target,” said Kaynat Chainwala, AVP-Commodity Research, Kotak Securities.

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