Investing.com– Oil Prices Decline in Asian Trade

Oil prices fell in Asian trade on Friday, heading for a weekly loss as hawkish signals from the Federal Reserve and ongoing concerns about slowing demand weighed on the market.

Crude prices faced pressure from a stronger dollar, which surged to an over two-year high after the Fed indicated a slower pace of rate cuts for the coming year.

On the demand side, limited details on further stimulus measures in China and indications of cooling U.S. fuel demand contributed to the decline in oil prices.

Additionally, traders are keeping an eye on a potential U.S. government shutdown, which could disrupt travel and economic activity across large areas of the country.

Brent oil futures for February fell 0.5% to $72.49 a barrel, while West Texas Intermediate (WTI) crude futures also decreased by 0.5% to $69.07 a barrel by 20:09 ET (01:09 GMT).

Oil Heads for Weekly Losses Amid Dollar Pressure

Both Brent and WTI contracts are set to lose over 2% this week, with most losses incurred over the past two sessions. The stronger dollar is influencing crude prices as it climbed in response to the expectation that U.S. interest rates will remain higher than anticipated, especially for 2025.

While the Fed cut rates by 25 basis points as expected, it revised its forecast for 2025 rate cuts down to just two, signaling caution regarding persistent inflation and the resilience of the U.S. economy amid uncertainty regarding the potential inflationary impacts of policies under President Donald Trump.

Demand Woes, Oversupply Fears Cloud Oil Outlook

Oil markets are also clouded by concerns over weak demand, particularly from top importer China. China's oil imports have been steadily decreasing in 2024, reflecting economic struggles amid ongoing disinflation.

Although China has announced plans to significantly increase fiscal spending and spur growth, traders await more specific details. As the world's largest oil importer, China's performance is critical for the global oil market.

On the supply side, fears of an oversupply due to increased production in the U.S. keep traders on alert. Trump has pledged to ramp up domestic oil production.

However, a more aggressive stance on Iran with stricter sanctions on its oil exports could tighten global supplies. This comes as the Organization of Petroleum Exporting Countries (OPEC) and its allies have recently indicated they will extend current production cuts.