Brent, WTI Close Week 2.5% on China Demand, Rate Cuts Worries

The US Dollar retreated from a two-year high after data showed cooling US inflation on Friday.

A weaker Dollar makes oil cheaper for holders of other currencies, while rate cuts could boost oil demand.

The annual increase in core inflation, excluding food and energy, slowed but remained well above the US Federal Reserve’s 2 per cent target at 3.1 per cent in November.

This came after Wednesday’s US central bank cut its benchmark overnight interest rate by 25 basis points to the 4.25 per cent -4.50 per cent range. It also forecasts only two rate reductions in 2025, in a nod to the economy’s continued resilience and still-high inflation.

The market remained concerned about the demand outlook, especially as it relates to China, the world’s largest oil importer.

Chinese state-owned refiner Sinopec 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 petrol weakens.

There are also pressures from possible moves by the incoming administration of President Donald Trump.

He threatened to levy tariffs against the European Union (EU) if the bloc does not buy more oil and gas from the United States, in the latest economic warning from the US president-elect before his inauguration next month.

In a brief post on his Truth Social platform, Trump said he told the EU “that they must make up their tremendous deficit with the United States by the large-scale purchase of our oil and gas”.

More supply could also be affected next year as the G7 countries consider ways to tighten the price cap on Russian oil, such as with an outright ban or by lowering the price threshold.

Russia has circumvented the $60 per barrel cap imposed in 2022 following the invasion of Ukraine through the use of its “shadow fleet” of ships, which the EU and the United Kingdom have targeted with further sanctions in recent days.