Crude oil heads for weekly losses; rate cuts eyed
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Investing.com — Oil prices fell Friday, on course for weekly losses, amid concerns about ample global supply, although losses have been limited by hints of looming interest rate cuts in the United States and Europe.
By 09:20 ET (14.20 GMT), the U.S. crude futures traded 0.3% lower at $78.71 a barrel and the Brent contract dropped 0.3% to $82.75 a barrel.
Oversupply and demand worries
Both benchmarks are on track for weekly losses, of over 1% in Brent’s case and close to 2% with Nymex, amid concerns that the global market will remain amply supplied during the course of the year.
The IEA’s oil markets and industry division head said, in an interview with Reuters, that the agency sees a relatively well-supplied market in 2024 with demand growth slowing, something that could put a ceiling on prices.
Data released on Thursday showed that China posted a 5.1% rise in imports in the first two months of 2024 from a year earlier to about 10.74 million barrels per day.
“However, the overall buying trend remains soft as the purchases were lower when compared to imports of 11.39MMbbls/d in December,” said analysts at ING, in a note. “China has been slowing its overseas purchases primarily due to slowing demand from refineries, weak economic indicators, and higher inventories.”
In Europe, eurozone gross domestic product showed growth was flat in the final quarter of last year, according to data released Friday, while the European Central Bank cut its projections for growth and inflation on Thursday.
Interest rate cuts coming?
Losses, however, have been limited by hints of looming interest rate cuts in the United States and Europe, which are seen likely boosting economic activity and future demand for crude.
In his second-day of testimony before Congress, Fed Chair Jerome Powell said, on Thursday, that the Federal Reserve is “not far” from reaching the confidence needed to cut interest rates this year, reiterating similar remarks from a day earlier.
The U.S. economy added more jobs than expected last month, as nonfarm payrolls rose by 275,000 in February, increasing from a downwardly revised total of 229,000 in January.
However, average hourly earnings grew by just 0.1% month-on-month, easing from a revised 0.5% in January, adding to perceptions of slowing inflation, and the unemployment rate climbed to 3.9% from 3.7%.
These remarks arrived on the heels of the European Central Bank keeping its benchmark rate unchanged, but signaling the potential for interest rate cuts reasonably shortly.
The ECB will likely start lowering interest rates some time between April and June, French central bank head and ECB policymaker Francois Villeroy de Galhau said on Friday.
