The global oil market has recently experienced a significant drop in prices, with a decline of more than 2%. This situation has been triggered by concerns over weaker demand from China and potential slowing in the pace of U.S. Federal Reserve interest rate cuts.

Brent crude futures settled down $1.52, or 2.09%, to $71.04 a barrel, while U.S. West Texas Intermediate crude futures (WTI) settled down $1.68, or 2.45%, at $67.02. This decline marks a weekly fall of around 4% for Brent and around 5% for WTI.

The decline in oil prices is largely attributed to China's oil refiners processing 4.6% less crude in October than a year earlier. This reduction is due to plant closures and reduced operating rates at smaller independent refiners, as per data from the National Bureau of Statistics.

The country's factory output growth also slowed last month, and demand woes in its property sector showed few signs of abating, adding to investors' concerns over the economic health of the world's largest crude importer.

John Kilduff, a partner at Again Capital in New York, noted that the headwinds out of China are persisting, and any stimulus they put forward could be damaged by a new round of tariffs by the Trump administration.

U.S. President-elect Donald Trump has pledged to end China's most-favored-nation trading status and impose tariffs on Chinese imports in excess of 60% - much higher than those imposed during his first term.

Global Demand and OPEC's Forecast

Oil prices also fell this week as major forecasters indicated slowing global demand growth. Global oil demand is getting weaker, said International Energy Agency (IEA) Executive Director Fatih Birol at the COP29 summit.

He attributed this mainly to the slowing Chinese economic growth and the increasing penetration of electric cars around the world. The IEA forecasts global oil supply to exceed demand by more than 1 million barrels per day in 2025 even if cuts remain in place from OPEC+.

OPEC, meanwhile, cut its forecast for global oil demand growth for this year and 2025, highlighting weakness in China, India, and other regions. This further adds to the complexity of the global oil market situation, with a decline in demand from China on one hand and uncertainty over the pace of U.S. Federal Reserve interest rate cuts on the other.

US Retail Sales and Interest Rate Cuts

On the U.S. front, retail sales increased slightly more than expected in October, suggesting the economy kicked off the fourth quarter on a strong note. However, the data added to the debate among Federal Reserve policymakers over the pace and extent of interest rate cuts as investors further downgraded their expectations for a rate reduction at the central bank's December meeting.

Lower interest rates typically spur economic growth, aiding fuel demand. Federal Reserve Bank of Boston President Susan Collins, however, did not rule out a December rate cut when speaking on Bloomberg's television channel.

In the currency market, the euro neared a one-year low against the dollar as the dollar surged on growth prospects and concerns on Trump's policies. The global markets are still concentrating on the effects of Trump's victory, with the general belief that his policies could lead to increased U.S. inflation when he officially becomes president in January, resulting in fewer interest rate cuts by the Federal Reserve.