Investing.com-- Oil prices fell Friday, heading for a hefty weekly loss and pressured by a stronger dollar and continued demand concerns, especially in top crude importer China.
A 08:55 ET (13:55 GMT), Brent oil futures expiring in February fell 0.5% to $72.43 a barrel, and West Texas Intermediate crude futures fell 2.4% to $68.91 a barrel.
Oil heads for weekly losses amid dollar pressure
Both crude benchmarks were set to lose around 3% this week, with a bulk of their losses coming over the past two sessions.
Crude was pressured by a stronger dollar, as the greenback shot up to an over two-year high after the Fed flagged a slower pace of rate cuts in the coming year.
The Fed cut rates by 25 basis points, as expected, but effectively halved its forecast for rate cuts in 2025, with policymakers now seeing only two potential cuts.
The US central bank signaled caution over sticky inflation and resilience in the U.S. economy, as well as uncertainty over the potentially inflationary effects of policies under incoming President Donald Trump.
Evidence that inflation remains elevated was seen earlier Friday after the personal consumption expenditures (PCE) price index, an inflation metric closely monitored by the Federal Reserve, climbed 2.4% in the year to November, above October's 2.3%
The so-called "core" metric, which strips out more volatile items like food and fuel, came in at 2.8% annually, unchanged from October.
Demand woes, oversupply fears cloud oil outlook
Oil markets were also pressured by concerns over sluggish demand, especially in top importer China. China’s oil imports steadily trended lower in 2024, as economic growth in the country floundered amid persistent disinflation.
While China did flag plans to aggressively increase fiscal spending and boost growth, traders were awaiting more details on these plans. The country is the world’s biggest oil importer, and has been a major point of anxiety for oil markets in recent years.
On the supply front, the prospect of increased production in the U.S. also kept traders on guard over a potential glut in the coming year. Trump has vowed to increase domestic oil production.
But Trump could also adopt a stricter stance on Iran, introducing tighter sanctions on the country’s oil exports. Such a scenario could potentially tighten global supplies, especially as the Organization of Petroleum Exporting and allies recently signaled it will extend ongoing production cuts.
Traders were also watching for a potential US government shutdown, which is expected to disrupt travel and economic activity in large swathes of the country.
Trump also said on Friday that the European Union may face tariffs if the bloc does not cut its growing deficit with the United States by making large oil and gas trades with the world's largest economy.
In a move that could pare supply, G7 countries are considering ways to tighten the price cap on Russian oil, such as with an outright ban or by lowering the price threshold, Bloomberg reported on Thursday.
(Ambar Warrick contributed to this article.)