Brent oil futures fell 34 cents, or 0.45%, to $74.54 a barrel as of 12:10 p.m. EDT. WTI crude oil futures fell 1 cent, or 0.01%, to $71.94.
Signs of a slowing economy in China, the largest consumer of raw materials, put pressure on prices. However, during the week, both benchmark indices rose by around 4%.
Prices have recovered after Brent fell below $69 for the first time in almost three years on September 10.
“The market concluded that a sub-$70 level combined with weak hedge fund sentiment on higher crude and fuel prices would require a recession to justify itself, a risk that this week’s US rate cut helped reduce,” said Ole Hansen, head of commodity strategy at Saxo Bank.
Prices rose more than 1% on Thursday, a day after the U.S. central bank decided to cut interest rates by half a percentage point. Interest rate cuts typically boost economic activity and energy demand, but some analysts believe they are concerned about weakness in the U.S. labor market. “Interest rate cuts in the U.S. have supported risk sentiment, weakened the dollar and supported crude oil this week,” said Giovanni Staunovo, an analyst at UBS.
“However, it will take time for rate cuts to support economic activity and oil demand growth,” he added.
The Fed projected another 50 basis points of rate cuts by the end of this year, a full percentage point of cuts next year and another half-percentage point reduction in 2026.
“The Fed’s decision to cut interest rates and a certain hangover from Hurricane Francine “Those are the only two things that are supporting the market right now,” said Tim Snyder, chief economist at Matador Economics.
About 6% of crude oil production and 10% of natural gas production in the U.S. Gulf of Mexico were knocked offline following Hurricane Francine, the U.S. Bureau of Safety and Environmental Enforcement (BSEE) said in its final update after the storm on Tuesday.
Additional support for oil prices came from a decline in US crude oil inventories to a one-year low last week.
A counter-seasonal oil market deficit of around 400,000 barrels per day (bpd) will support Brent crude prices in the $70-$75 per barrel range over the next quarter, Citi analysts said on Thursday, although they added that prices could collapse in 2025.
Rising tensions in the Middle East, which increase the risk of supply disruption, have further boosted the oil market. Walkie-talkies used by the Lebanese militant group Hezbollah exploded on Wednesday after pager explosions the day before.
However, US President Joe Biden said at the White House on Friday that reaching a ceasefire deal in Gaza remains realistic, telling reporters: “We have to keep trying.”
In China, refinery output slowed for a fifth consecutive month in August and industrial production growth hit a five-month low.
China also issued its third and likely final batch of fuel export quotas for the year, keeping volumes in line with 2023 levels.
“This move indicates that refinery margins are too weak to justify further activity,” StoneX analyst Alex Hodes said in a note Friday.
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