Crude oil prices slid over 1% on Friday, pushing toward the $71.00 level and marking another week of challenges in the energy market. The upbeat sentiment following Donald Trump’s election victory has shifted as oil markets face renewed concerns about a potentially weakened Chinese demand and the ripple effects of looming U.S. tariffs on Chinese exports.
U.S. Dollar Finds Support as Powell’s Commitment Reassures Markets
The U.S. Dollar Index (DXY) edged higher as Fed Chair Jerome Powell affirmed his intention to complete his term. Powell’s comments came after the Fed delivered a 25-basis-point rate cut, soothing markets initially shaken by uncertainty about his tenure under Trump’s administration. A stronger dollar typically weighs on crude prices by making oil more expensive for non-dollar holders, adding another headwind to oil’s outlook this week.
Chinese Demand Concerns Add Downward Pressure
Oil markets are turning their attention to China’s economy, a significant oil consumer facing the potential double hit of a slowing economy and the impact of new tariffs. Given China’s pivotal role in global oil demand, any contraction could lead to a larger-than-expected decline in oil consumption through 2025. China’s slower economic growth outlook is now a top concern among traders, signaling possible reductions in OPEC production targets to stabilize prices.
Also read : Crude Oil Drops Nearly 3% As Trump Secures Presidency, US Dollar Rallies 2% Amid Election Outcome
Key Market Drivers and Events
In addition to China’s demand worries, the energy sector closely watches supply-side dynamics and geopolitical factors that could affect prices:
- OPEC Supply Growth: In October, OPEC’s production surged by 370,000 barrels per day, largely from Libya’s recovery to over one million barrels per day. With additional production, OPEC could face pressures to curb supply further.
- Baker Hughes Rig Count: The U.S. oil rig count, a gauge of domestic production potential, is scheduled for release later today. Any significant change could influence future U.S. production and potentially impact global supply dynamics.
- Tropical Storm Rafael: While not expected to make landfall, Rafael’s approach toward Texas and Louisiana could briefly impact U.S. Gulf Coast operations, though likely with limited long-term effects.
