July 19 2024: Oil prices declined on Friday, pressured by a strong U.S. dollar, mixed economic signals, and ongoing concerns about China’s economic growth, which dampened investor sentiment.
Price Movement and Currency Impact
Brent crude prices fell by 41 cents, or 0.5%, to $84.70 a barrel by 0650 GMT, while U.S. West Texas Intermediate (WTI) crude futures dropped 49 cents, or 0.6%, to $82.33 a barrel. For the week, Brent was down 0.3%, whereas WTI was trading marginally higher.
The U.S. dollar index climbed for the second consecutive session following stronger-than-expected data on the U.S. labor market and manufacturing earlier in the week. A stronger dollar reduces demand for dollar-denominated oil from buyers using other currencies.
China’s Economic Concerns
A lack of concrete stimulus measures from top oil importer China has also weighed on commodities overall. China’s economy grew at a slower-than-expected rate of 4.7% in the second quarter, according to official data, raising concerns about the country’s oil demand.
“Concerns over supply in the short term kept the losses minimal,” ANZ analysts noted, referencing worsening wildfires that threaten production in the Canadian oil sands.
Global Economic Signals
Elsewhere, Japan’s core inflation rose in June, potentially paving the way for an interest rate hike in this major oil market. Oil prices found some support in the previous two sessions after the U.S. government reported a larger-than-expected weekly decline in oil stockpiles.
However, analysts at consultancy firm FGE pointed out that broader inventory trends appear more bearish than expected this month. They noted that U.S. crude stocks have decreased at a slower-than-usual pace for this time of the year, and global fuel stocks rose last week.
OPEC+ Output Policy
The OPEC+ producer group is unlikely to recommend changing the group’s output policy, including a plan to start unwinding one layer of oil output cuts from October, according to three sources who spoke to Reuters on Thursday.
Overall, while supply concerns offered some support, broader economic worries and a strong dollar weighed heavily on oil prices.