© Reuters. General view of oil tanks and the Bayway Refinery of Phillips 66 in Linden, New Jersey, U.S., March 30, 2020. REUTERS/Mike Segar/file photo
By Ahmad Ghaddar
LONDON (Reuters) -Oil prices eased on Friday, following sharp gains in the previous session, after New York Federal Reserve President John Williams pushed back on surging market expectations for interest rate cuts.
futures fell 46 cents, or 0.6%, to $76.15 a barrel at 1504 GMT, but were on track for the first weekly gain in two months. U.S. West Texas Intermediate (WTI) crude lost 39 cents, or 0.5%, to $71.19 and was set to end the week broadly unchanged.
“We aren’t really talking about rate cuts right now,” Williams said in an interview with CNBC. When it comes to the question of lowering rates, “I just think it’s just premature to be even thinking about that” at this point, he said.
The dollar fell to a four-month low on Thursday after the U.S. central bank indicated interest rate hikes have likely ended and lower borrowing costs are coming in 2024. The recovered on Friday.
A weaker dollar makes dollar-denominated oil cheaper for foreign purchasers.
Higher oil consumption forecasts also helped to support prices this week.
World oil demand will rise by 1.1 million barrels per day (bpd) in 2024, the IEA said in a monthly report, up 130,000 bpd from its previous forecast, citing an improvement in the outlook for U.S. demand and lower oil prices.
The 2024 estimate is less than half of the Organization of the Petroleum Exporting Countries’ (OPEC) demand growth forecast of 2.25 million bpd.
“OPEC+ production cuts are likely to keep the oil market in balance at the start of 2024 despite weaker demand, which should allay current oversupply concerns,” Commerzbank (ETR:) said.
OPEC+, which groups OPEC and allies led by Russia, in late November agreed voluntary cuts of about 2.2 million bpd lasting throughout the first quarter.
Weak economic data from Germany, Europe’s biggest economy, and China, the world’s biggest oil importer, also weighed on prices.
The HCOB German Flash Composite Purchasing Managers’ Index (PMI), compiled by S&P Global, fell for the sixth consecutive month, declining to 46.7 in December from November’s 47.8, below the 48.2 forecast by economists.
Data released by China’s statistics bureau on Friday showed refinery runs in November dropped to their lowest level since the start of 2023, as margin pressure on non-state owned refiners saw them cut back production, while sluggish diesel consumption weighed on national fuel demand.
Despite ongoing woes in China’s property market, the data also showed a better-than-expected performance in industrial output and improving retail sales, lending some relief to market sentiment amid the country’s anaemic post-COVID economic recovery.
(Additional reporting Andrew Hayley in BeijingEditing by Susan Fenton and Sharon Singleton)
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