Crude oil prices edged lower on Friday, as mounting concerns over weak global demand outweighed market optimism stemming from recent U.S. interest rate cuts. Despite support from a softer dollar and improved financial conditions, traders remain cautious amid signs of slowing industrial activity and muted fuel consumption across key economies.

The benchmark contracts — Brent crude and WTI (West Texas Intermediate) — both traded in the red as sentiment continues to sour around the health of global oil demand heading into the final quarter of 2025.

Oil Prices Fall Despite Bullish Rate Signals

As of midday trading in London:

• Brent crude fell $0.47 to $87.02 per barrel

• WTI slipped $0.39 to $82.84 per barrel

These moves come just days after the U.S. Federal Reserve delivered its third rate cut of 2025, lowering the federal funds rate by 25 basis points to support the cooling American economy. Normally, rate cuts weaken the U.S. dollar and support commodity prices — including oil — by making them cheaper for holders of other currencies.

However, that upside has been muted by persistent concerns that global demand is faltering — particularly in Asia and parts of Europe — raising questions about whether lower borrowing costs can truly revive energy consumption.

Demand Signals Are Weak Across Multiple Regions

The most significant headwinds for oil prices are now centered on demand softness rather than supply disruptions. Key indicators across major economies paint a picture of sluggish consumption:

• China, the world’s second-largest oil consumer, continues to report lackluster industrial production and weak refinery activity. August’s crude oil imports fell by 4.6% compared to the previous month.

• European diesel demand is slowing, impacted by reduced manufacturing activity and warmer-than-usual temperatures.

• In the United States, gasoline demand remains seasonally weak despite the summer driving season, and distillate inventories have increased unexpectedly.

Analysts at Goldman Sachs noted in a client report:

“While monetary easing should be supportive for oil in theory, demand fundamentals remain too soft to drive sustained upside. The market wants to see real consumption, not just easier credit.”

Supply Risks Still Lurk, But Not Enough to Lift Prices

On the supply side, risks remain — particularly in Russia and OPEC+ nations. However, these risks have not yet been enough to support prices above the current trading range.

• Russian exports are under pressure due to tighter sanctions enforcement and infrastructure challenges, especially in the Black Sea.

• OPEC+ output cuts remain in place, with Saudi Arabia and Russia extending voluntary cuts through year-end.

• U.S. shale output has plateaued, but production remains near record levels, limiting bullish momentum.

Despite these factors, the market is not experiencing any acute supply shortage. With inventories stable and refinery margins narrowing, traders are focusing more on consumption trends than geopolitical flare-ups.

Market Sentiment Turns Cautious Heading into Q4

With demand data pointing downward and central bank easing already priced in, sentiment across energy markets has become increasingly cautious.

The latest CFTC data shows that net speculative long positions in crude futures have declined for three straight weeks. This suggests that hedge funds and commodity managers are scaling back bullish bets on oil, awaiting clearer signs of a turnaround in global demand.

Technical traders also note that Brent crude is struggling to hold above the $88 resistance level, while WTI faces downside pressure below $83.

Until demand data improves or a new geopolitical catalyst emerges, oil prices are expected to remain range-bound.

ForexFlash Outlook: Key Factors to Watch

1. Upcoming PMI Data

Purchasing Managers’ Index (PMI) data from the U.S., Europe, and China next week will offer more clarity on manufacturing activity — a major driver of industrial fuel demand.

2. U.S. Inventory Reports

Traders will closely monitor the EIA’s weekly inventory report for signs of drawdowns in gasoline and distillate stocks. Any surprise build could further weigh on prices.

3. Geopolitical Flashpoints

While not front and center this week, tensions in the Middle East, the Black Sea region, and Africa remain risks to global oil supply.

Key Takeaways

• Oil prices fell on Friday as demand concerns outweighed the boost from U.S. rate cuts.

• Weak refinery throughput in China and rising fuel inventories in the U.S. signal soft demand.

• OPEC+ supply discipline and geopolitical risks are not enough to drive prices higher.

• Speculators are reducing exposure, awaiting clearer signals of economic recovery.