MW Oil prices head for weekly losses on strong dollar, China demand worries
By Myra P. Saefong and William Watts
Oil futures fell Friday and were on track for weekly losses, after feeling pressure from a surging U.S. dollar and continued concerns about the demand outlook, particularly from China, the world's largest crude importer.
Price moves
-- West Texas Intermediate crude CL00 for February delivery CL.1 CLG25 fell 82 cents, or 1.2%, to $68.56 a barrel on the New York Mercantile Exchange, on track for a weekly fall of 3.2%, FactSet data show.
-- February Brent crude BRN00 BRNG25, the global benchmark, dropped 71 cents, or 1%, to $72.17 a barrel on ICE Futures Europe, headed for a weekly drop of 3.1%.
-- January gasoline RBF25 lost 0.5% to $1.9131 a gallon, trading more than 4% lower for the week, while January heating oil HOF25 shed 1.1% to $2.2125 a gallon , eying a weekly loss of around 2.5%.
-- Natural gas for January delivery NGF25 traded at $3.587 per million British thermal units, up nearly 0.1% for the day and trading over 9% higher for the week.
Market drivers
"There is so much going on under the oil market's surface," said Stephen Innes, managing partner at SPI Asset Management.
"As the year draws to a close, markets find themselves entrenched in tight ranges as the strengthening U.S. dollar dampens international demand," he told MarketWatch. However, "enduring demand from the U.S. could counterbalance the lackluster demand from China, particularly in the transportation sector."
Read: Oil may 'collapse' below $50 a barrel in 2025 if this perfect storm hits the market
A surging dollar and a selloff in equities contributed to the negative tone in oil and other commodities after the Federal Reserve on Wednesday signaled it would likely deliver fewer interest rate cuts in 2025 than policymakers had previously expected.
The ICE U.S. Dollar Index DXY, a measure of the currency against a basket of six major rivals, edged lower Friday but has rallied more than 1% for the week to trade at its highest in more than two years. A stronger dollar can be a negative for commodities priced in the unit, making them more expensive to users of other currencies.
U.S. benchmark stock indexes saw mixed trading Friday, but were headed for steep weekly losses after Wednesday's Fed decision.
Meanwhile, incoming U.S. President Donald Trump threatened to impose import tariffs on the European Union unless it carries out large scale purchases of American oil and natural gas, according to a post on his social media platform Truth Social.
The warning however, "will not cause sleepless nights in Brussels," wrote David Oxley, chief climate and commodities economist at Capital Economics, in a note Friday.
"It's firmly in the bloc's interest to purchase U.S. liquified natural gas $(LNG)$ as part of the continued shift away from Russian gas molecules," he said. LNG is a "much bigger part of the landscape in the EU gas market than it was before the war in Ukraine."
Trump has previously said he would impose a 10% tariff on all goods imported into the U.S. and place 60% tariffs on all imports fromm China.
We must consider whether Trump's trade war rhetoric "escalates into concrete policy actions, undoubtedly impacting China's manufacturing sector," said SPI Asset Management'dInnes. If his trade threats materialize into actual policies, "this could stifle China's manufacturing output and reduce oil demand," driving oil prices toward the lower end of their recent ranges as the nation approaches Inauguration Day.
"This scenario underscores the intricate link between geopolitical maneuvers and global commodity markets, highlighting the need to monitor political and economic signals," Innes said.
Analysts said a report from China's state-owned refiner Sinopec added to pressure on crude Friday. Sinopec said the country's crude imports could peak as early as next year, with oil consumption expected to plateau by 2027 due to weakening demand for diesel and gasoline, according to Reuters.
-Myra P. Saefong -William Watts
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
December 20, 2024 10:14 ET (15:14 GMT)
Copyright (c) 2024 Dow Jones & Company, Inc.
Comments