Oil prices fell further throughout the week, closing 1% lower on Friday, as markets remained wary of weak Chinese demand despite producer group OPEC+ extending supply cuts.
Brent crude futures fell 88 cents, or 1.1%, to settle at $82.08 a barrel. WTI crude oil futures fell 92 cents, or 1.2%, to $78.01.
While OPEC’s production cuts and Russian sanctions are slowing exports, demand from China appears to be lagging and U.S. driving season demand has yet to show up.
China earlier this week set an economic growth target of around 5% for 2024, and many analysts say the target is ambitious, complaining about insufficient incentives.
Thursday’s data showed that China’s crude oil imports increased in the first two months of the year compared to the same period in 2023, but were also weaker than in previous months, continuing the softening trend in purchases of the world’s largest buyer.
On the supply side, OPEC+ members led by Saudi Arabia and Russia agreed on Sunday to extend voluntary oil production cuts of 2.2 million barrels per day into the second quarter, providing extra support to the market amid concerns about global growth and rising production outside the group.
According to research, crude production in OPEC+ countries increased by 212,000 barrels per day (bpd) in February compared to January production.
Baker Hughes announced that energy companies in the USA this week reduced the number of oil drilling rigs, an indicator of future production, by 2 to 504, the lowest level since February 23.
Oil markets had focused in the previous two sessions on signals about the timing of possible interest rate cuts in the United States and the European Union, which would boost economic growth and boost oil demand.
U.S. employment growth added 275,000 new nonfarm jobs in February, beating survey expectations for a 200,000 increase, according to the Bureau of Labor Statistics.
But the unemployment rate also rose and wage growth slowed; This indicates that the US economy may slow down, which keeps the Federal Reserve’s expected interest rate cut in June on the table.
The data points to a less tight employment market, supporting the soft landing narrative and raising the possibility of a rate cut in June.
Powell said Thursday that the central bank is “not far away” from gaining enough confidence that inflation has fallen far enough to start lowering interest rates.
French central bank governor and ECB policymaker Francois Villeroy de Galhau said the European Central Bank (ECB) will likely start cutting interest rates between April and June.
