Oil Prices Decline Amid Mixed Chinese Data and Fed Rate Speculations

Key Highlights

1. Price Movements: WTI crude fell to $70.60/bbl, and Brent crude slipped to $73.85/bbl, reflecting cautious trading ahead of the Fed's rate decision.
2. b Mixed Chinese economic data, with strong industrial output but weak retail sales, dampened recovery optimism.
3. Market Outlook: OPEC+ delayed output hikes until April, while the IEA raised its global oil demand forecast for 2025 by 1.1 million bpd, citing Chinese stimulus.
4. Inventory Trends: U.S. crude stocks fell by 1.425 million barrels, while gasoline and distillate inventories rose significantly.

Oil Prices Slide Amid Mixed Market Signals

• Oil prices eased further on Tuesday as China's economic data renewed demand concerns, while investors remained cautious ahead of the U.S. Federal Reserve's interest rate decision.
• U.S. West Texas Intermediate crude was down 11 cents at $70.60 a barrel at 0409 GMT, while Brent crude futures fell 6 cents to $73.85 a barrel. MCX Crude oil prices opened at 5842 with a gain of 0.40%.

Demand Concerns Weigh on Chinese Recovery

• Investors also exercised caution ahead of the U.S. Federal Reserve’s final policy meeting of the year, where a widely anticipated 25-basis-point rate cut could influence future economic growth and oil consumption.
• The downturn follows Monday’s multi-week highs, driven by strong industrial output data in China but tempered by unexpected weakness in consumer spending. Analysts believe the mixed signals underscore a fragile recovery in the world’s second-largest oil consumer.
• Tony Sycamore, market analyst at IG, noted, “Prices are weighed down by profit-taking after last week’s 6% rally and the disappointing Chinese economic data.”
• The Federal Reserve is expected to announce a quarter-point rate cut on Wednesday, marking the final decision of 2024. While the market has priced in the move, investors are keenly awaiting Fed Chair Jerome Powell’s outlook for 2025 and 2026, particularly regarding inflation and economic growth.
• Lower interest rates can boost economic activity, subsequently increasing demand for oil. However, with inflation concerns lingering, the pace of future rate cuts remains uncertain.

Petroleum News: U.S. Inventory Data Reflects Supply Imbalances

• Crude oil prices settled down by 0.33% at ₹6,022, pressured by weaker consumer spending and slowing retail sales in China, the world’s largest oil importer. 
• Although China’s industrial output showed slight improvement in November, retail performance fell short, prompting concerns over economic fragility and the need for further stimulus measures. China’s subdued outlook also contributed to OPEC+ delaying its planned output hikes until April.
• Supporting prices to some extent were concerns over supply disruptions due to potential U.S. sanctions on Russia and Iran. Chinese crude imports are expected to remain elevated into 2025, driven by refiners leveraging lower prices and independent refiners rushing to utilize quotas. 
• The International Energy Agency (IEA) raised its 2025 global oil demand forecast to 1.1 million barrels per day (bpd), citing China’s recent stimulus, although it anticipates a surplus as non-OPEC+ nations—led by Brazil, Canada, and the U.S.—increase supply by 1.5 million bpd.
• Meanwhile, U.S. crude inventories fell by 1.425 million barrels last week, exceeding expectations, while gasoline stocks surged by 5.086 million barrels, and distillate inventories rose by 3.235 million barrels. 
• The U.S. Energy Information Administration (EIA) revised its global oil demand growth forecast downward for 2025 to 1.2 million bpd, citing slowing activity in China and North America.

Expert Opinion and Market Outlook

The Fed is widely expected to announce a quarter-point interest rate cut, its final decision of the year. Market focus is on signals about future rate cuts in 2025 and 2026, especially in light of potential inflation concerns under the incoming Trump administration. Crude oil prices faced fresh selling pressure as open interest surged by 42.92% to 12,177 contracts, while prices fell ₹20. Immediate support is seen at ₹5,986, with a break below targeting ₹5,949. Resistance is at ₹6,054, and a move above this level could push prices toward ₹6,085.