Oil Heads for Weekly Drop as Dollar Strengthens on Fed Outlook

(Bloomberg) -- Oil declined for a second day, extending a weekly decline, as a strengthening US dollar pressured prices.

Brent crude dropped toward $72 a barrel and is down almost 3% this week, while West Texas Intermediate was near $69. A rally in the dollar got extra impetus after the Federal Reserve signaled fewer interest-rate cuts next year on Wednesday, making oil more expensive for many buyers.

Meanwhile, China’s biggest refiner, Sinopec, said Thursday the nation’s gasoline demand peaked last year, adding to an already-weak outlook in the world’s top crude importer.

Crude is headed for a modest yearly decline, after trading in the narrowest annual range since 2019. Prices have been buffeted by weak Chinese demand and concerns over increased production, mainly from the Americas, as well as the prospect of tougher sanctions on Iran and Russia.

“The downbeat risk environment on a more hawkish Fed may have some spillover effect onto oil prices, coupled with strength in the US dollar,” said Yeap Jun Rong, a market strategist for IG Asia Pte in Singapore. “Uncertainty over the oil demand outlook remains a key overhang,” he said, referring to global growth projections.

Group of Seven nations are exploring ways to toughen sanctions on Russian oil, according to people familiar with the matter. Although there’s no consensus yet on next steps, options under consideration range from an outright ban to lowering the price cap to about $40 a barrel from the current $60, they said.

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