Brent crude futures fell by 51 cents, or 0.69%, to close at $72.88 a barrel. U.S. West Texas Intermediate crude futures fell 67 cents, or 0.95%, to settle at $69.91 per barrel.
The U.S. Federal Reserve cut rates as expected on Wednesday but Chair Jerome Powell warned that stubborn inflation would make the central bank more cautious about cutting rates next year.
The U.S. dollar rose to a two-year high, making oil more expensive for buyers holding other currencies.
“A less accommodative Fed in 2025 than initially expected has markets adjusting their expectations,” Alex Hodes, analyst at commodities brokerage StoneX said.
Elsewhere, Bank of England policymakers held interest rates steady on Thursday, while officials disagreed over how to respond to a slowing economy with nagging inflation pressure. The Bank of Japan kept ultra-low interest rates as U.S. President-elect Donald Trump’s vows to impose tariffs cast a shadow over the country’s export-reliant economy.
Softening economic activity could deepen a slowdown in oil demand growth next year. Brent futures have shed more than 5% so far this year, setting up a second consecutive annual loss, as a faltering Chinese economy weighed heavily on crude oil demand.
Energy transition measures have also hit demand sharply in China, the top oil importer. State-backed energy giant Sinopec on Thursday said it expects China’s petroleum consumption to peak in 2027 as fuel demand weakens.
The oil market is widely expected to be in a surplus next year, with J.P. Morgan analysts predicting that supply will outpace demand to the tune of 1.2 million barrels per day (bpd).
Some support for the oil market came as U.S. crude stocks declined by 934,000 barrels in the week to Dec. 13. Still, the draw was smaller than the 1.6 million-barrel drawdown analysts had forecast in a Reuters poll.