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Mixed Economic Signals Lead to Dip in Oil Prices
Oil prices saw a decline on Friday, marking the potential for a second weekly drop influenced by varied economic indicators that affected investor sentiment and led to a stronger dollar. Brent crude slid by 51 cents, or 0.6%, bringing the price to $84.50 per barrel by 0035 GMT. Concurrently, U.S. West Texas Intermediate (WTI) crude futures dipped 72 cents, or 0.9%, to $82.10 per barrel.
Impact of a Strengthening Dollar
The U.S. dollar index experienced gains for the second consecutive session following unexpectedly strong U.S. labor market and manufacturing data earlier in the week. A firmer dollar typically reduces the appeal of dollar-priced oil for investors holding alternative currencies, thereby dampening demand.
China's Economic Performance and Oil Demand Concerns
The absence of definitive stimulus measures from China's critical economic meeting has also put pressure on commodity prices. China's economy expanded at a slower-than-anticipated rate of 4.7% in the second quarter, raising worries about the country's oil demand. "Crude oil was under pressure amid a broader risk-off tone across markets," noted ANZ analyst Daniel Hynes.
Japan's Economic Indicators
In Japan, June saw a rise in core inflation, which could open the possibility of an interest rate hike in another major oil market. This development adds another layer of complexity to the global economic landscape that oil prices must navigate.
Recent Trends and Projections
For the week, Brent crude appeared set for a decline of around 0.5%, while WTI was down approximately 0.1%. Despite a slight boost in the previous two sessions after a U.S. government report showing a heftier-than-expected weekly reduction in oil stockpiles, broader inventory trends seemed less optimistic. Analysts from consultancy FGE pointed out that crude stocks were drawing down more slowly than usual for this period, and global fuel stocks saw an increase last week.
OPEC+ Production Policy
Sources have indicated that the OPEC+ group is unlikely to recommend any changes to its current output strategy, including the plan to gradually ease one layer of oil output cuts starting in October. This stance adds to the steady stream of factors shaping the current oil market dynamics.
