Oil prices fell on Friday due to concerns about demand growth in 2025, particularly from China, the world’s largest crude importer. This decline has set global oil benchmarks on track to end the week down nearly 3%. Brent crude futures dropped by 33 cents, or 0.45%, to $72.55 a barrel by 07:30 GMT, while U.S. West Texas Intermediate crude futures decreased by 32 cents, or 0.46%, to $69.06 per barrel. According to the annual energy outlook released by Chinese state-owned refiner Sinopec on Thursday, China’s crude imports could peak as early as 2025, and the country’s oil consumption is expected to peak by 2027 due to weakening demand for diesel and gasoline.
“Benchmark crude prices are currently in a prolonged consolidation phase as the market heads toward year-end, weighed down by uncertainty regarding oil demand growth,” said Emril Jamil, a senior research specialist at LSEG. He emphasized that OPEC+ will need to maintain supply discipline to boost prices and calm market fears over ongoing revisions to demand growth forecasts. Recently, the Organization of the Petroleum Exporting Countries and its allies (OPEC+) have cut their growth forecast for global oil demand in 2024 for the fifth consecutive month.
Additionally, the dollar’s rise to a two-year high has also put downward pressure on oil prices, following the Federal Reserve’s signal that it would proceed cautiously with interest rate cuts in 2025. A stronger dollar increases the price of oil for holders of other currencies, while a slower pace of rate cuts could hinder economic growth and reduce oil demand. JPMorgan predicts that the oil market will shift from a balanced state in 2024 to a surplus of 1.2 million barrels per day (bpd) in 2025. The bank forecasts that non-OPEC+ supply will increase by 1.8 million bpd in 2025, while OPEC output remains at current levels.
In a potential move to reduce supply, G7 countries are considering tightening the price cap on Russian oil, possibly through an outright ban or by lowering the price threshold, as reported by Bloomberg on Thursday. Russia has been able to circumvent the $60 per barrel cap imposed in 2022 by using its “shadow fleet” of ships, prompting the EU and Britain to target these vessels with additional sanctions in recent days.
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