Oil prices eased about 1% to a one-week low on Tuesday, driven by weak economic data from China and Germany, while investors remained cautious ahead of a US Federal Reserve decision on interest rates.
Brent futures fell 72 cents, or 1.0%, to settle at $73.19 a barrel, while US West Texas Intermediate crude slipped 63 cents, or 0.9%, to settle at $70.08. This was the lowest close for Brent since December 10 and cut the premium of Brent over WTI to a 12-week low of $3.54 a barrel.
Analysts say that when Brent’s premium over WTI falls below $4 a barrel, it makes less economic sense for energy firms to send ships to pick up US crude, leading to lower US exports. In China, industrial output growth quickened slightly in November, but retail sales disappointed, keeping alive calls for Beijing to ramp up consumer-focused stimulus.
In Germany, business morale worsened more than expected in December, according to a survey by the Ifo Institute, weighed down by companies’ pessimistic assessment of the coming months amid geopolitical uncertainty and an industrial slump. In contrast, US retail sales increased more than expected in November, with an acceleration in motor vehicle and online purchases.
The US Federal Reserve is expected to cut interest rates on Wednesday for the third time since initiating its policy easing cycle. Investors will watch policymakers’ forecasts for signals on whether the Fed will be more cautious in 2025.
US oil storage data is due later this week, with analysts projecting a draw of about 1.6 million barrels of crude from storage during the week ended December 13. This would be the first time energy firms pulled oil out of storage for four weeks in a row since August.
The European Union has adopted a new package of sanctions against Russia, including tougher measures against Chinese entities and more vessels from Moscow’s so-called shadow fleet. OPEC+ includes the Organization of the Petroleum Exporting Countries and allies like Kazakhstan and Russia that have agreed to curtail output to support oil prices.
Source: https://www.reuters.com/markets/commodities/oil-prices-holding-pattern-ahead-federal-reserve-decision-2024-12-17