Crude oil prices declined further as traders weighed signs of a slower rate cut by the Fed, weakening demand forecasts from China, and potential geopolitical pressures. Brent crude dropped toward $72 a barrel, while West Texas Intermediate hovered near $69, both on track for a 3% weekly loss.
The Federal Reserve's indication of fewer interest rate cuts for 2025 bolstered the U.S. dollar to its strongest level in two years, making oil more expensive for international buyers.
Adding to market tension, U.S. President-elect Donald Trump suggested imposing tariffs on European Union countries unless they increase imports of American oil and gas. This threat, combined with ongoing concerns about a possible U.S. government shutdown, heightened economic uncertainty.
On the demand side, bearish sentiment was driven by China's dimming outlook. State-owned Sinopec forecasted that China’s oil demand growth would peak within three years, while CNPC projected demand could peak as early as 2025, spurred by widespread adoption of electric vehicles and LNG-powered trucks. By 2035, half of China's vehicles are expected to be electric.
Supply concerns also pressured prices. Forecasts from JP Morgan predicted a 2025 supply surplus of 1.2 million barrels per day (bpd), fueled by non-OPEC production growth of 1.8 million bpd. Despite this, OPEC is expected to maintain current output levels. Meanwhile, discussions among the Group of Seven nations about tightening sanctions on Russian oil, including the possibility of lowering the price cap from $60 to $40 per barrel, added to market uncertainties.