Oil News: Is the Market Set for Losses as China’s Demand Weakens and OPEC+ Cuts Lag?

Oil Prices End Week Lower as Demand Concerns and Strong Dollar Pressure Market

Light crude oil futures settled at $69.46, down $1.41 or 1.99% for the week, as markets grappled with persistent demand concerns and the strength of the U.S. dollar. Traders remained cautious as global growth forecasts dimmed and key economic indicators pointed to sluggish consumption.

China’s Demand Outlook Weighs on Market Sentiment

China’s energy outlook cast a shadow over oil prices, with Sinopec projecting that the country’s crude imports could peak as early as 2025, while overall oil consumption may plateau by 2027​. As the world’s largest crude importer, signs of weakening demand in China rattled market confidence, contributing to crude’s weekly decline. The forecast of slowing diesel and gasoline demand underscored long-term concerns over China’s economic trajectory.

Further pressure came from OPEC+, which downgraded its 2024 global oil demand growth forecast for the fifth consecutive month​. JPMorgan added to the bearish tone, predicting a surplus of 1.2 million barrels per day (bpd) in 2025 as non-OPEC+ supply rises by 1.8 million bpd, while OPEC output holds steady. This looming supply overhang could exacerbate the market’s oversupply, keeping prices in check.

Federal Reserve and Dollar Strength Apply Additional Pressure

The Federal Reserve’s monetary policy played a pivotal role in shaping oil price action. The U.S. dollar surged to near two-year highs earlier in the week, amplifying headwinds for crude by making it more expensive for non-dollar holders​. Although inflation data cooled by week’s end, triggering a slight pullback in the dollar, the Fed’s cautious outlook on future rate cuts reinforced fears of slower economic growth.

Higher bond yields and tighter financial conditions stemming from the Fed’s “higher-for-longer” stance further constrained market optimism. Elevated borrowing costs raised the prospect of dampened industrial activity and energy consumption, reinforcing downside risks for oil demand.

Geopolitical Tensions Add Complexity but Limited Support

Geopolitical developments injected volatility but failed to offer significant upside for oil prices. The G7 floated the idea of stricter enforcement of Russian oil price caps, but Russia’s use of a “shadow fleet” of tankers to circumvent sanctions blunted the potential impact​.

A more immediate wildcard emerged from the U.S., where President-elect Donald Trump threatened tariffs on the European Union if the bloc fails to address its trade deficit with the U.S.​. Trump’s comments suggested that increased oil and gas imports from the U.S. could mitigate trade tensions. However, the threat of tariffs raised concerns over retaliatory measures from Europe, potentially disrupting transatlantic trade and impacting broader energy markets.

Meanwhile, the European Union and the UK imposed sanctions on 53 vessels involved in transporting illicit Russian crude, but analysts expect minimal disruption to supply flows in the near term​.

Market Forecast: Bearish with Volatility Risks

Crude oil prices are likely to stay under pressure heading into the next trading week. A break below $68.69 could pave the way for further declines toward $66.11 and $62.94​. On the upside, resistance at $71.10 remains a critical hurdle. Should prices breach this level, traders may target a move toward $74.00, although upside momentum appears constrained by weak demand signals and policy uncertainty.

Market participants should brace for continued volatility, with macroeconomic updates, OPEC+ actions, and Chinese demand data shaping sentiment in the near term.

More Information in our Economic Calendar.