Weaker Dollar Follows Indication of Lower Borrowing Costs from U.S. Central Bank
The U.S. dollar plummeted to a four-month low on Thursday after the U.S. central bank signaled the likely cessation of interest rate hikes and the commencement of lowered borrowing costs in 2024. In its monthly report, the International Energy Agency (IEA) upgraded its estimate for the rise in world oil demand to 1.1 million barrels per day (bpd) in 2024, marking an increase of 130,000 bpd from its previous forecast. This revision resulted from improved U.S. demand prospects and reduced oil prices. However, the IEA’s projection is less than half that of OPEC, which predicts a demand growth of 2.25 million bpd. Commerzbank expressed confidence that OPEC+ production cuts will maintain market equilibrium early in 2024, even with weakened demand. Additionally, weak economic indicators from Germany and China exerted downward pressure on prices.
German and Chinese Economic Data Influencing Market Sentiment
The HCOB German Flash Composite Purchasing Managers’ Index (PMI), compiled by S&P Global, faced its sixth consecutive monthly decline, dropping to 46.7 in December compared to November’s 47.8. This figure fell below the economists’ forecast of 48.2. Concurrently, China’s statistics bureau released data showing that refinery runs in November hit their lowest level since the beginning of 2023. Non-state owned refiners curtailed production due to margin pressure while subdued diesel consumption weighed on national fuel demand. Despite China’s ongoing property market challenges, the data indicated better-than-expected industrial output and improving retail sales, offering a glimmer of hope amid the country’s sluggish post-COVID economic recovery.