Global oil prices fell by 1% on Friday, pressured by mounting concerns over future demand growth, especially in China, and the impact of a robust US dollar, Reuters reports.
Both Brent and US crude benchmarks are now on track for a weekly loss of nearly 3%, reflecting broader uncertainty in the oil market as it approaches the end of the year.
As of 11:17 GMT, Brent crude futures declined by 76 cents, or 1%, to $72.12 per barrel. Similarly, US West Texas Intermediate (WTI) crude futures dropped by 76 cents, or 1.1%, to $68.62 per barrel. The declines come amid a broader period of price consolidation as market participants weigh global demand prospects against a backdrop of fluctuating economic conditions.
A key driver of the bearish sentiment is China’s anticipated reduction in crude import growth. According to an energy outlook released Thursday by Chinese state-owned refiner Sinopec, the country’s crude imports could peak as early as 2025, with total oil consumption expected to peak by 2027. The forecast is based on a projected decline in demand for gasoline and diesel as China pivots toward cleaner energy sources and electric vehicles.
Given China’s status as the world’s largest crude importer, any indication of a slowdown in its oil demand is closely watched by global markets.
“Benchmark crude prices are in a prolonged consolidation phase as the market heads towards the year-end, weighed by uncertainty in oil demand growth,” said Emril Jamil, a senior research specialist at LSEG.
Adding to market uncertainty, the Organization of the Petroleum Exporting Countries and its allies (OPEC+) recently downgraded their forecast for global oil demand growth in 2024 for the fifth consecutive month. Analysts say OPEC+ will need to exercise supply discipline to stabilize prices amid ongoing concerns about slowing demand.
Looking further ahead, JPMorgan predicts a shift in market balance in 2025. The bank estimates that non-OPEC+ supply will increase by 1.8 million barrels per day (bpd) in 2025, while OPEC’s output is expected to remain stable. This supply boost is forecast to push the market into a surplus of 1.2 million bpd, which could put further pressure on prices.
The strength of the US dollar also contributed to oil’s decline. The dollar climbed to near a two-year high after the US Federal Reserve signaled a cautious approach to interest rate cuts in 2025. A stronger dollar makes oil more expensive for holders of other currencies, thereby curbing demand. Additionally, slower rate cuts could dampen global economic growth, reducing demand for crude.
US President-elect Donald Trump weighed in on energy trade with Europe, warning that the European Union could face tariffs if it fails to address its trade deficit with the US Trump called on the EU to increase its purchases of US oil and natural gas, a move that could shift global trade flows and influence oil prices.
On the supply front, G7 countries are reportedly considering tightening the price cap on Russian oil, which was initially set at $60 per barrel in 2022. Measures under discussion include either lowering the price threshold or imposing an outright ban. This follows efforts by the EU and Britain to crack down on Russia’s “shadow fleet” of ships, which the country uses to bypass the existing cap. Any tightening of sanctions on Russian oil could create fresh volatility in global markets.
As oil benchmarks head for a weekly loss of nearly 3%, traders remain focused on factors that could influence supply and demand in 2024 and beyond. Concerns over China’s demand outlook, OPEC+ supply discipline, and the impact of a strong US dollar are expected to weigh on sentiment heading into the new year.
