The price of oil fell by 1.25% amid signs of a decline in oil demand in China and a revision of the prospects for easing the Fed's monetary policy against the background of recent US economic data and hawkish statements by Fed Chairman Powell.
Overall, the prospects for increased oil supplies from the United States and OPEC+, as well as doubts about China's economic recovery, continue to cause concern and put pressure on prices. The recent rally in the US currency has also had a negative impact on the price of oil. Since the beginning of the week, the US Dollar Currency Index (DXY) has increased by 1.4%, and is preparing to record the largest increase since the end of September.
Meanwhile, today the National Bureau of Statistics said that in October, the volume of oil refining at Chinese refineries fell by 4.6% per annum amid the closures of some plants and reduced operating rates at smaller independent refiners. It was the 7th consecutive monthly decline. Separate data showed that industrial production grew by 5.3% per year in October, slowing from 5.4% in September and missing expectations (+5.5%). Retail sales jumped an annual 4.8%, beating forecasts for 3.8% and up sharply from 3.2% in September.
As for the Fed's monetary policy outlook, traders are paring bets of the pace and scale of future rate cuts, with Fed funds futures now implementing just 71 basis points worth of easing by end-2025. According to the CME FedWatch Tool, markets see a 62.6% probability of a 0.25% rate cut in December (compared to 64.6% a week earlier). A slowdown in the expected reduction in interest rates may negatively affect economic growth, which will limit demand for fuel.
Oil prices also fell this week as major forecasters indicated market fundamentals remained bearish.