Investing.com– Oil prices fell in Asian trading on Thursday, pressured by a stronger dollar after the Federal Reserve forecast a much slower pace of interest rate cuts over the coming year.
Crude markets also faced mixed data on U.S. inventories, which indicated that demand for the fuel was likely easing with the onset of the winter season.
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February-delivered oils fell 0.5% to $73.02, while oils fell 0.6% to $69.60 a barrel as of 8:15 p.m. ET (01:15 GMT).
However, both contracts saw gains this week after reports suggested that top oil importer China will increase its fiscal spending in 2025 to support the economy. Oil supplies are also expected to tighten after the Organization of the Petroleum Exporting Countries recently agreed to extend ongoing production cuts.
Oil under pressure from a stronger dollar due to the Fed’s hawkish stance
The rose to its highest level in more than two years on Wednesday, after the Fed lowered its forecast for interest rate cuts in 2025.
The central bank now expects only two cuts of 25 basis points over the coming year, compared to previously forecasting four cuts. The Fed also cut interest rates by 25 basis points, although this decision was widely anticipated by markets.
The Fed’s outlook caused a sharp decline in risk markets, while boosting the dollar.
A stronger dollar puts pressure on oil demand by making the commodity more expensive for international buyers.
Operators also fear a slowdown in global economic growth in the event of a relative rise in rates, which would limit demand.
Oil gets some support from China hopes and tighter supply
Crude prices posted some gains this week, particularly after signs of more elaborate fiscal stimulus in China, the main oil importer.
Slowing Chinese demand has been a major concern for oil markets as the country struggles with a prolonged economic recession.
The prospect of tighter supply also provided some support for crude, after Kazakhstan signaled it would comply with recent production quotas set by OPEC+.
The cartel agreed to extend ongoing production cuts until at least the second quarter of 2025, amid continued concerns about slowing demand.
