Oil prices fell on Friday as China, the world’s biggest crude importer, continued to signal weakness in demand amid its uneven economic recovery. The prospects of higher supplies from the U.S. and OPEC+ in addition to doubts over China’s economic recovery continue to impact oil prices this week.
Brent oil futures for January delivery decreased by 1.06 percent, settling at $71.79 per barrel, while West Texas Intermediate (WTI) crude futures slipped by 1.02 percent, reaching $68 per barrel, as of 6:06 GMT. For the week, Brent is set to fall over 2.7 percent while WTI is set to decline by more than 3.3 percent.
China demand concerns persist
This week, oil prices have somewhat stabilized around the $71.00 level. However, the lack of supportive factors suggests that price recovery remains slow in the short term. China’s oil refiners in October processed 4.6 percent less crude than a year earlier, falling for the seventh month straight amid closures of some plants and weaker operating rates at smaller independent refiners, data from the National Bureau of Statistics showed on Friday.
The decline in run rates occurred as China’s factory output growth slowed last month and demand concerns in its property sector revealed few signs of abating even though consumer spending increased, government data showed. Oil prices also fell this week as major forecasters indicated that market fundamentals remained weak.
Supply to outweigh demand in 2025
The International Energy Agency expects global oil supply to exceed demand in 2025 even if OPEC+ output cuts remain in place, which includes the Organization of the Petroleum Exporting Countries and allies such as Russia, as rising production from the U.S. and other non-member producers outpaces the weaker demand.
Last week, U.S. crude inventories rose by 2.1 million barrels, the Energy Information Administration (EIA) said on Thursday, rising at a much faster pace than the market expected. Meanwhile, gasoline stocks fell by 4.4 million barrels last week to the lowest since November 2022, the EIA said. Distillate stockpiles, which include diesel and heating oil, also fell unexpectedly by 1.4 million barrels.
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Stronger dollar impacts oil demand
Uncertainty regarding the implications of a potential second Donald Trump presidency has added pressure to oil markets. The president-elect has pledged to boost U.S. oil production and impose trade tariffs on China, the leading oil importer. Following Trump’s election victory last week, the dollar surged to a one-year high, further impacting crude prices.
A stronger U.S. dollar may cap the upside for dollar-denominated oil as it makes it more expensive for holders of other currencies, which can reduce demand. The U.S. dollar Index, a measure of the value of the dollar against a basket of six currencies, currently trades near 106.81 after hitting a new high for this year near 107.05.
“Crude futures are trying to establish equilibrium pricing as a rising U.S. dollar index is creating a further headwind, along with a Trump administration that will now have control of Congress, which is likely to roll back most of the Biden administration’s energy policies,” Dennis Kissler, senior vice president of trading at BOK Financial, said in a note.
