Oil prices post 3% weekly loss amid strong dollar, China demand fears

Oil prices steadily dropped in the third week of December, primarily due to the US Federal Reserve’s more cautious approach to reducing interest rates next year and the dollar reaching a two-year high.

The International benchmark Brent crude traded at $71.71 per barrel at 2.48 p.m. local time (1148 GMT) on Friday, down by around 3.2% relative to the closing price of $74.06 a barrel last week.

West Texas Intermediate (WTI), the American benchmark, traded at $68.46 a barrel at the same time on Friday, a decline of about 3.08% from last Friday’s session, which closed at $70.64 per barrel.

Oil prices declined following the Federal Reserve’s announcement during this week’s meeting, signaling a more gradual and cautious approach to future interest rate cuts.

‘The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals,’ the bank said in a statement on Wednesday.

‘The Committee’s assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments,’ it added.

On Wednesday, the Fed had cut the benchmark policy rate by 25 basis points to the range of 4.25%-4.50%, as widely expected.

Meanwhile, the expectation that the Fed may slow the pace of policy rate cuts has boosted dollar demand.

Predictions that the tax cuts, immigration restrictions and import tariffs promised by Donald Trump, who will take office in January, will drive inflation in the US also contribute to the rise of the dollar.

The US dollar index reached its highest level in 2 years at 108.880 at 2.53 p.m. local time (1153 GMT) on Friday.

The strong dollar is expected to reduce demand by making oil more expensive for foreign currency users.

Also, concerns about a possible slowdown in fuel demand in 2025 especially in China, the world’s largest oil importer, continue to put pressure on prices.

Chinese top refiner Sinopec said in its annual energy outlook on Thursday that it forecasts China’s crude oil imports could peak by 2025, with the country’s overall oil consumption reaching its peak by 2027 due to weakening demand for diesel and gasoline.

• China
• Crude Oil
• International benchmark Brent crude