Economic slowdown, demand drop in US drives oil prices down

By Zeynep Beyza Kilic

Oil prices fell on Thursday, with data showing a slowdown in the US economy and falling crude demand in the world's biggest oil consumer.

International benchmark Brent crude traded at $81.86 per barrel at 10.39 a.m. local time (0739 GMT) for a 0.35% drop from the closing price of $82.15 a barrel in the previous trading session.

The American benchmark West Texas Intermediate (WTI) traded at $78.32 per barrel at the same time, for a 0.28% fall after the previous session closed at $78.54 per barrel.

According to figures released Wednesday, the US economy grew by 3.2% in the fourth quarter of 2023, which was below estimates and indicated a slowdown in growth momentum.

Analysts await the release of the PCE Price Index, due later in the day, which measures the changes in the price of goods and services purchased by consumers, excluding food and energy.

The PCE Price Index is used as an inflation tracker by the Federal Reserve (Fed), so while it is still uncertain when the Fed will begin cutting interest rates, the data may offer clues about the bank's intentions.

Market players will also look at speeches by Fed officials to gauge the bank's stance on interest rates.

New York Fed President John Williams noted that the bank will consider three interest rate cuts this year as a "reasonable start,” starting probably late in the year.

Boston Fed President Susan Collins also stated that she believes it would probably be appropriate for the Fed to start easing policy later in the year, while Atlanta Fed President Raphael Bostic said he favored a patient approach to monetary policy.

Pushing downward pressure on prices, the Energy Information Administration revealed a commercial crude oil inventory buildup in the US, the world's biggest oil-consuming country, with an increase of 4.2 million barrels to 447.2 million barrels last week.

Meanwhile, escalating geopolitical tensions in the Red Sea and the Middle East continue to support higher oil prices, as concerns remain that the conflict in the region could disrupt global oil supply.

Additionally, news reports indicate that OPEC+ countries could extend supply cuts to limit oil price declines.