Oil falls on strong dollar, demand growth worries

By Arathy Somasekhar

HOUSTON (Reuters) -Oil prices eased on Friday due to a strong dollar and worries about demand growth in 2025, especially in top crude importer China.

Brent crude futures were down by 36 cents, or 0.5%, to $72.54 a barrel by 10:54 a.m. EST (1554 GMT). U.S. West Texas Intermediate crude futures also eased 28 cents, or 0.4%, to $69.10 per barrel. 

The Brent benchmark was on track to end the week down about 2.5%, while WTI was set to ease about 3%.

"Crude futures remain in a choppy holiday trading pattern as a sharply elevated U.S. dollar index remains a major headwind for crude, along with weak economic numbers from China and Europe," said Dennis Kissler, senior vice president of trading at BOK Financial.

While the U.S. dollar retreated from a two-year high on Friday, it was heading for its third consecutive week of gains, with data showing a slowdown in inflation two days after the Federal Reserve cut interest rates.

A stronger dollar makes oil more expensive for holders of other currencies, while a slower pace of rate cuts could dampen economic growth and trim oil demand.

Fed policymakers on Friday signalled their readiness to take a break from further reductions in borrowing costs next year as they take stock of progress to lower inflation.

Higher interest rates increase the cost of borrowing, which can slow economic activity and also dampen oil demand.

Chinese state-owned refiner Sinopec (OTC:SHIIY ) 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. 

OPEC+ would require supply discipline to perk up prices and soothe jittery market nerves over continuous revisions of its demand growth outlook, said Emril Jamil, senior research specialist at LSEG. 

The Organization of the Petroleum Exporting Countries and allies, a group known as OPEC+, recently cut its growth forecast for 2024 global oil demand for a fifth straight month.

JPMorgan sees the oil market moving from balance in 2024 to a surplus of 1.2 million barrels per day in 2025, as the bank forecasts non-OPEC+ supply increasing by 1.8 million bpd in 2025 and OPEC output remaining at current levels.

U.S. President-elect Donald Trump said on Friday the European Union may face tariffs if the bloc does not cut its growing deficit with the U.S. by making large oil and gas trades with the world's largest economy.



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

Russia has circumvented the $60 per barrel cap imposed in 2022 through the use of its "shadow fleet" of ships, which the EU and Britain have targeted with further sanctions in recent days.

Source: Investing.com