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OIL SAGS ON SOFT CHINESE SPENDING, INVESTOR PAUSE BEFORE US FED RATE MOVE

By Laila Kearney
December 16, 202410:06 PM GMT+2Updated 9 days ago
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Pump jacks operate in front of a drilling rig in an oil field in Midland, Texas
U.S. August 22, 2018. Picture taken August 22, 2018. REUTERS/Nick Oxford//File
Photo Purchase Licensing Rights, opens new tab
 * Summary

 * Brent and WTI fall slightly after reaching multi-week highs
 * China's consumer spending data falls short of expectations
 * US Federal Reserve expected to cut interest rates this week
 * US crude, distillate inventories likely fell last week - poll

NEW YORK, Dec 16 (Reuters) - Oil futures slipped from the highest levels in
several weeks on Monday on weakness in consumer spending in China, the world's
largest oil importer, and as investors paused buying ahead of the U.S. Federal
Reserve's interest rate decision.
Brent crude futures settled at $73.91 a barrel, down 58 cents, or 0.8% lower,
after settling on Friday at their highest since Nov. 22.
U.S. West Texas Intermediate crude settled at $70.71 a barrel, shedding 58
cents, and also down 0.8% the session after it registered its highest close
since Nov. 7.
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Last week, oil benefited from the expectation that supply would tighten with
additional sanctions on crude producers Russia and Iran, while possible lower
interest rates in the U.S. and Europe would spur demand.
"We feel that last week’s events have been appropriately priced and that this
week will be bringing fewer items capable of supporting oil prices," said Jim
Ritterbusch of consultancy Ritterbusch and Associates in Florida.
Advertisement · Scroll to continue

Chinese retail sales were slower than expected, keeping pressure on Beijing to
ramp up stimulus for a fragile economy facing U.S. trade tariffs under a second
Trump administration.
"It's just a very bearish scenario where there's not a lot hope of demand growth
for crude oil," said Bob Yawger, director of energy futures at Mizuho in New
York.
The Chinese outlook contributed the decision by oil producer group OPEC+ to
postpone plans for higher output until April.

"Whatever stimulus is being deployed, consumers are not buying into it; and
without a serious sea-change in personal spending behaviour, China's economic
fortunes will be stunted," said John Evans at oil broker PVM.
Traders also took profits while awaiting the U.S. Central Bank's decision on
interest rates this week.
IG market analyst Tony Sycamore said that light profit-taking was to be expected
after prices jumped more than 6% last week.

He noted that many banks and funds are likely to have closed their books given
reduced appetite for positions during the holiday season.
The Fed is expected to cut interest rates by a quarter of a percentage point at
its Dec. 17-18 meeting, which will also provide an updated look at how much
further Fed officials think they will reduce rates in 2025 and perhaps into
2026.
Lower interest rates can stimulate economic growth and increase oil demand.

Oil prices were further pressured by the U.S. dollar, which briefly hovered
close to a three-week high versus other major currencies, ahead of the week of
central bank meetings.
The U.S. dollar and commodities like crude oil tend to trade inversely.
Investors were also looking to U.S. oil inventory reports coming up this week
for guidance.
U.S. crude oil and distillate inventories were expected to have fallen last
week, while gasoline stocks likely rose, a preliminary Reuters poll showed ahead
of a report from the American Petroleum Institute at 4:30 p.m. EST (2130 GMT) on
Tuesday and one from the Energy Information Administration at 10:30 a.m. EST
(1530 GMT) on Wednesday
Four analysts polled by Reuters estimated on average that crude inventories fell
by about 1.9 million barrels in the week to Dec. 13.

Get a look at the day ahead in U.S. and global markets with the Morning Bid U.S.
newsletter. Sign up here.

Additional reporting by Arunima Kumar and Florence Tan Editing by David Goodman
and David Gregorio

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 * Suggested Topics:
 * Energy
 * Transport Fuels
 * Storage

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