Oil prices dipped slightly on Friday as traders secured recent profits, although crude is still on track for a weekly gain, bolstered by a significant U.S. interest rate cut that eased some concerns over declining demand.
Crude prices have seen a robust recovery from the near three-year lows reached earlier in September, with most of the rebound occurring this week as the dollar weakened following a 50 basis point rate cut by the U.S. Fed. Heightened tensions in the Middle East also supported crude prices.
Concerns over slowing demand
However, despite the weekly rise, larger gains were constrained by ongoing worries about slowing demand, particularly in China, the world’s largest oil importer. U.S. fuel demand also appeared to be tapering off as the travel-heavy summer season ended.
Brent oil futures, set to expire in November, dropped 0.4 percent to $74.60 per barrel, while West Texas Intermediate (WTI) crude futures also fell 0.4 percent to $70.86 per barrel by 21:09 ET (01:09 GMT). Despite these declines, oil is still heading for weekly gains, with Brent up about 3.4 percent and WTI futures rising 4.6 percent this week.
Impact of a weaker dollar on crude prices
The weaker dollar supported crude prices after the Federal Reserve‘s rate cut met the upper end of market expectations, initiating an easing cycle that traders anticipate will stimulate economic growth in the coming quarters. Lower interest rates typically encourage economic activity, which in turn is expected to boost crude demand.
Persistent worries over China’s economic outlook
Nevertheless, concerns about China persist as a key issue for crude markets, with economic data from the world’s largest oil importer showing little sign of improvement.
The People’s Bank of China maintained its benchmark lending rates on Friday, despite increasing calls for Beijing to introduce more economic stimulus. Data from earlier in September revealed that Chinese refinery output had declined for the fifth consecutive month in August, and the country’s oil imports remained weak. These concerns over China’s economic outlook dragged oil prices to near three-year lows earlier this month and have limited any significant recovery in crude prices.
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