An oil pumpjack operates in Los Angeles on July 31, 2023.
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Crude oil futures posted a weekly loss as lackluster demand out of China collided with a market that the International Energy Agency views as well-supplied.
The West Texas Intermediate contract for April fell 92 cents, or 1.17%, to settle at $78.01 a barrel on Friday. The Brent contract for May dropped 88 cents, or 1.06%, to settle at $82.08 a barrel.
U.S. crude and the global benchmark lost 2.45% and 1.76%, respectively, for the week.
Crude oil imports in China fell about 5.7% to 10.8 million barrels per day in the first two months of the year, compared to 11.44 million barrels per day in December, according to S&P Global Commodity Insights.
“The big burst of China demand recovery continues to just not pan out and without it, it’s going to be hard for these prices to sustain themselves and recover further and get WTI back above 80 bucks,” John Kilduff, founding partner at Again Capital, told CNBC.
A senior official at the International Energy Agency, meanwhile, told Reuters this week that the oil market should be relatively well-supplied this year.
Traders were also studying the latest nonfarm payroll data for February together with Federal Reserve Board Chair Jerome Powell’s testimony before Congress this week to assess where interest rates — and oil demand — may go.
The U.S. added 275,000 jobs in February, compared to 198,000 expected by economists surveyed by Dow Jones. But the unemployment rate rose to 3.9%.
Powell told Congress on Thursday that the central bank is “not far” from cutting rates. Powell told the Senate Banking Committee that the Fed wants more confidence that inflation is moving sustainably at 2%.
“When we do get that confidence, and we’re not far from it, it’ll be appropriate to begin to dial back the level of restriction,” Powell said.
Lower interest rates typically stimulate economic growth, which supports crude oil demand.
Kilduff said the petroleum complex’s reaction to the interest rate outlook has been “almost schizophrenic.” While lower rates are supportive of demand, the Fed will also only cut rates due to slack in the economy and signs of weakness, Kilduff said.
