Oil prices fell by about 1% as disappointing economic data from China renewed concerns about demand, while investors awaited the Fed’s interest rate decision.
Brent and WTI crude both retreated after last week’s 6% rally, weighed down by profit-taking and weak Chinese consumer spending data, despite strength in industrial output.
The Fed is expected to cut interest rates by 25 basis points at its final policy meeting of the year, but traders remain cautious. The meeting will provide guidance on future rate cuts in 2025 and 2026, as well as the Fed’s stance on inflation amid the incoming Trump administration. Lower interest rates could support economic growth and oil demand, but any surprises from the Fed could move the markets.
Concerns about oversupply persist, with non-OPEC+ producers like the U.S. and Brazil expected to boost output in 2025. The International Energy Agency (IEA) forecasted a 950,000-barrel-per-day supply surplus next year, further weighing on sentiment. Additionally, ongoing pessimism surrounding China - the world’s largest crude importer - has dragged oil prices into a narrow trading range, reducing market volatility.
Meanwhile, geopolitical tensions remain in focus. The European Union announced new sanctions targeting Russia’s “shadow fleet” of oil tankers, while Western nations plan to intensify vessel inspections in strategic waterways. However, experts noted that these measures are unlikely to cause significant disruptions, as most Russian oil flows now bypass Western services.
Overall, weak Chinese economic indicators, combined with sluggish global manufacturing activity, reinforce lingering doubts about oil demand despite ongoing supply risks related to Russia and Iran.