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Subdued Movement Overview:
Oil prices displayed a mixed performance on Friday as market participants weighed expectations of slowing demand against hopes for potential interest rate cuts in the United States. Brent crude futures experienced a marginal decline, while US West Texas Intermediate crude futures saw marginal gains.
Price Dynamics:
Brent crude futures retreated by 0.1 percent to $82.75 per barrel, while US West Texas Intermediate crude futures inched up by one cent to $78.04 per barrel. Despite this, both benchmarks had registered over 1 percent gains on Thursday, buoyed by larger-than-anticipated declines in US retail sales data, fueling speculations of impending interest rate adjustments by the Federal Reserve.
Retail Sales Data Impact:
Thursday’s US Department of Commerce report revealed a significant 0.8 percent decline in retail sales for the previous month, marking the largest drop since February 2023. This pronounced contraction surpassed economists’ expectations, which had forecasted a more modest 0.1 percent decrease.
Market Sentiment Analysis:
Hiroyuki Kikukawa, President of NS Trading, noted that while optimism regarding potential US interest rate cuts provided support to oil prices on Thursday, investors remain cautious ahead of the upcoming long holiday weekend in the United States, slated for next Monday. Additionally, market participants are closely monitoring geopolitical tensions in the Middle East, assessing their potential impact on crude oil supply chains. Kikukawa anticipates WTI to hover within the $70 to $80 range in the near term.
Demand Forecast Concerns:
Adding to the market’s hesitancy, the International Energy Agency (IEA) released a report on Thursday highlighting a slowdown in global oil demand growth. The IEA revised down its growth forecast for 2024, contrasting with more optimistic projections by OPEC. The agency now expects global oil demand to increase by 1.22 million barrels per day, a slight reduction from the previous month’s estimates.
Conclusion:
Oil markets navigate a landscape of mixed sentiment, influenced by economic data releases, demand outlooks, and geopolitical tensions. While recent data spurred hopes for potential interest rate adjustments in the US, concerns persist regarding the trajectory of global oil demand. Market participants remain vigilant amidst evolving dynamics, poised to react to forthcoming developments.
