Oil prices fell on Thursday as cautious signals from central banks in the US and Europe heightened concerns about slowing economic activity and its impact on oil demand.
Brent crude futures declined 51 cents (0.7%) to settle at US$72.88 per barrel, while US West Texas Intermediate (WTI) crude for January delivery dropped 67 cents (1%) to close at US$69.91 per barrel. The more actively traded WTI February contract settled 64 cents lower at US$69.38 per barrel.
The Federal Reserve maintained a cautious stance, with Chair Jerome Powell signalling a slower pace of rate cuts due to persistent inflation concerns. The US dollar rose to a two-year high, making oil more expensive for buyers using other currencies.
"The market is adjusting to a less accommodative Fed outlook for 2025," noted Alex Hodes, analyst at commodities brokerage StoneX.
Economic uncertainties extend globally. The Bank of England held interest rates steady, reflecting divisions over how to respond to a slowing economy. In Japan, ultra-low rates remained as policymakers faced headwinds from potential trade tariffs under the incoming Trump administration.
Surplus Forecast for 2025
Oil markets are bracing for a surplus in 2025, with J.P. Morgan analysts predicting supply will exceed demand by 1.2 million barrels per day. Brent futures have already lost more than 5% this year, marking a potential second consecutive annual loss as China's economic struggles weigh on demand.
China's state-owned Sinopec anticipates the country's petroleum consumption will peak in 2027 due to a structural shift driven by energy transition measures.
On the supply side, sanctions and policy actions have done little to lift prices. Despite US-imposed sanctions on Iranian oil traders, analysts expect limited effects on the broader market, with Brent crude prices forecast to average US$73 per barrel in 2025.
US crude inventories provided some relief, declining by 934,000 barrels last week, although this drawdown was smaller than analysts' expectations of 1.6 million barrels, according to a Reuters poll.
The global oil market remains under pressure from economic headwinds, with both demand and supply factors likely to shape price movements in the coming year.
