Oil prices closed 1 per cent lower on Friday and fell even more for the week as markets remained wary of soft Chinese demand even as producer group OPEC+ extended supply cuts.
Brent crude futures settled down 88 cents, or 1.1 per cent, at $82.08 a barrel. U.S. West Texas Intermediate crude futures (WTI) fell 92 cents, or 1.2 per cent, at $78.01.
Both benchmarks fell in the week, with Brent down 1.8 per cent and WTI 2.5 per cent.
“While supplies have remained on the tighter side given OPEC’s production cuts and Russian sanctions slowing exports, demand from China looks to be lagging and U.S. driving season demand has yet to kick in,” said Dennis Kissler, senior vice president of trading at BOK Financial.
China earlier this week set an economic growth target for 2024 of around 5 per cent, which many analysts say is ambitious without much more stimulus.
China’s imports of crude oil rose in the first two months of the year compared with the same period in 2023, but they were also weaker than the preceding months, data showed on Thursday, continuing a trend of softening purchases by the world’s biggest buyer.
On the supply side, OPEC+ members led by Saudi Arabia and Russia agreed on Sunday to extend voluntary oil output cuts of 2.2 million barrels per day into the second quarter, giving extra support to the market amid concerns over global growth and rising output outside the group.
However, crude production in OPEC+ countries increased by 212,000 barrels per day (bpd) in February over January output, according to Rystad Energy data and research.
Meanwhile in the U.S., energy firms this week cut the number of oil rigs – an indicator of future production – by two to 504 this week, their lowest since Feb. 23, energy services firm Baker Hughes said.
Oil markets have homed in on signals on the timing of possible rate cuts in the U.S. and European Union in the previous two sessions. Lower interest rates could increase oil demand by boosting economic growth.
U.S. job growth rose by 275,000 new nonfarm payrolls in February, according to the Bureau of Labor Statistics, beating expectations of a 200,000 rise according to a Reuters survey.
But the unemployment rate also rose and wage growth decelerated, indicating that the U.S. economy could be slowing which kept on the table an anticipated interest rate cut in June from the Federal Reserve.
The data suggests “a less tight job market, supporting the soft landing narrative and increasing the odds of a June rate cut,” UBS analyst Giovanni Staunovo said.
U.S. Federal Reserve Chair Jerome Powell said on Thursday that the central bank was “not far” from gaining enough confidence that inflation is falling sufficiently to begin cutting interest rates.
The European Central Bank (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.