Oil sheds 1%, posts weekly loss on soft China demand even as OPEC extends supply cuts; Brent back to $82/bbl

Crude oil prices shed one per cent and posted a weekly decline as investors were cautious of poor demand in China even as Organisation of Petroleum Exporting Countries (OPEC) extended the global supply cuts to boost prices. China has set an economic growth target of five per cent for 2024, which is beyond analysts' expectations.

Frontline benchmarks Brent crude futures closed 1.1 per cent lower at $82.08 a barrel on Friday. US West Texas Intermediate crude futures (WTI) dropped 92 cents or 1.2 per cent to settle at $78.01. Both benchmarks declined on the week, with Brent lower at 1.8 per cent and WTI at 2.5 per cent.  Coming to domestic prices, crude oil futures last settled 0.05 per cent lower at ₹6,462 per barrel on the Multi Commodity Exchange (MCX).

Also Read: Explained | Why did OPEC+ members extend oil output cuts to mid-2024

What's impacting crude oil prices?

-China's crude oil imports rose year-on-year but dropped sequentially, displaying the softer purchases by the world's biggest buyer.

-The OPEC bloc, led by Saudi Arabia, extended the voluntary oil output cuts of 2.2 million barrels per day into the second quarter, with an aim to support the market amid concerns over global economic growth

-In the last two sessions, oil markets have absorbed signals of possible interest rate cuts by the US Federal Reserve and the European Union. Historically, lower interest rates by central banks increases oil demand by higher growth.

-In the US, new nonfarm payrolls rose by 275,000 in February, according to data by the Bureau of Labor Statistics. The unemployment rate also rose and wage growth decelerated, which are indicators of a slower economic growth. This brings back the possibility of rate cuts in June.

-Fed Chair Jerome Powell claimed last week that the central bank is not far from gaining enough confidence that the US inflation is falling sufficiently enough to start cutting interest rates.

-French central bank head and ECB policymaker Francois Villeroy de Galhau said last week that the European Central Bank (ECB) will likely start lowering interest rates some time between April and June.