Oil weakens as waits for new signs of recovery in Chinese fuel demand
Oil prices eased on Friday as the market awaited new signs of a recovery in fuel demand in China to offset the looming declines in major economies, and with major benchmarks headed for their second straight week of losses.
Brent crude futures fell 34 cents, or 0.4 percent, to $81.83 a barrel at 0740 GMT, while West Texas Intermediate (WTI) crude futures fell 37 cents, or 0.5 percent, to $75.51 a barrel.
Both contracts are down more than 5% so far this week, and mixed signals about recovery in fuel demand in China, the world's largest oil importer, are keeping prices in check.
After the Lunar New Year holiday, there was a sharp increase in traffic in the 15 largest cities in China. Following the easing of COVID-19 restrictions, the prospect of an economic recovery in China has revived with a weakening dollar making the commodity cheaper.
The dollar fell as the US Federal Reserve's aggressive rate hikes were no longer expected. Central banks of other major economies continue to make larger rate hikes even as inflation falls.
While supported by the weaker dollar, oil's gains have been limited by slow growth in the US, the world's largest oil consumer, and recessions in places like the UK, Europe, Japan, and Canada.
On the raw demand outlook, China's reopening is important and clear signs are needed that the US economic growth momentum is intact.
The US central bank has returned to a more moderate rate hike after a year of major rate hikes, but policymakers predict "continuous increases" in borrowing costs will be necessary.
There is no doubt that the approaching rate hikes in 2023 will put pressure on the US and European economies and increase fears that the economic slowdown will likely reduce global crude oil demand.
Investors are watching developments regarding the February 5 ban of the European Union on Russian refined products, where EU countries are likely to reach an agreement to set a ceiling price for Russian petroleum products today.
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