Oil Prices Fall Amid Stronger Dollar and Mixed Inventory Data

Oil prices fell in Asian trade on Thursday, facing pressure from a stronger dollar after the Federal Reserve projected a slower pace of interest rate cuts for the coming year.

Crude markets are also reacting to mixed U.S. inventory data, which indicates that fuel demand may be cooling with the onset of winter.

Brent oil futures expiring in February fell 0.5% to $73.02 a barrel, while West Texas Intermediate crude futures decreased 0.6% to $69.60 a barrel by 20:15 ET (01:15 GMT).

Nonetheless, both contracts have seen some gains this week following reports that top oil importer China plans to increase fiscal spending in 2025 to support its economy. Additionally, oil supplies are expected to tighten after OPEC agreed to extend ongoing production cuts.

Oil Pressured by Stronger Dollar on Hawkish Fed

The dollar surged to a two-year high on Wednesday after the Fed revised its outlook for rate cuts in 2025, now only anticipating two 25 basis point cuts compared to earlier forecasts of four.

While the Fed did cut interest rates by 25 basis points, this move was largely anticipated by the markets. The revised outlook led to a sharp pullback in risk-driven markets, simultaneously boosting the dollar.

A stronger dollar puts downward pressure on oil demand, as it makes the commodity more expensive for international buyers. Traders are also concerned that higher rates may cool global economic growth, further limiting demand.

Oil Supported by China Hopes and Tighter Supplies

Despite the drop in prices, crude oil found some support this week, particularly due to anticipated fiscal stimulus in China, the world’s largest oil importer.

Concerns about softening demand from China have been significant, given its ongoing economic challenges. However, tighter supplies are providing some support for prices, as Kazakhstan has indicated compliance with OPEC+ production quotas.

The cartel has agreed to maintain ongoing production cuts until at least the second quarter of 2025 amid persistent worries regarding slowing demand.