Oil prices dropped on Friday, driven by concerns over weak demand in China, the world’s largest crude importer, as its economic recovery remains sluggish.
Brent crude futures had fallen by 65 cents, or 0.9%, to $71.91 per barrel, while U.S. West Texas Intermediate crude was down 62 cents, or 0.9%, to $68.08.
For the week, Brent is on track for a 2.7% decline, while WTI is expected to drop by 3.3%, according to Reuters.
“While oil prices have somewhat stabilised around the $71.00 level of support this week, the lack of a concrete bullish catalyst suggests that price recovery remains tepid for now,” Yeap Jun Rong, market strategist at IG, said.
Yeah added that the potential for increased oil supplies from both the U.S. and OPEC+, combined with persistent doubts about China’s economic recovery, continues to raise concerns in the market.
In October, China’s oil refiners processed 4.6% less crude than the same month last year, marking a seventh straight month of year-on-year decline.
The decrease was driven by plant closures and lower operating rates at smaller independent refiners, according to data from the National Bureau of Statistics released on Friday.
The drop in refining activity coincided with a slowdown in China’s factory output growth and ongoing challenges in its property sector, despite a rise in consumer spending, according to government data.
Additionally, Yeap highlighted comments from U.S. Federal Reserve Chair Jerome Powell on Thursday, suggesting that the Fed does not feel the need to expedite interest rate cuts.
A slower pace of rate reductions could dampen economic growth, potentially limiting fuel demand.
This, in turn, supports a stronger U.S. dollar, which makes dollar-denominated crude more expensive for buyers using other currencies.
Oil prices also declined this week as major forecasters signaled that market fundamentals remain bearish.
The International Energy Agency projected that global oil supply will outstrip demand by 2025, even if OPEC+ maintains its production cuts.
This imbalance is expected to result from rising output in the U.S. and other non-OPEC producers, which will likely surpass sluggish demand growth.
