DTN Oil

WASHINGTON (DTN) -- West Texas Intermediate futures on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange edged lower in the afternoon session Friday. Futures were under pressure from a rebounding U.S. dollar index, although all petroleum contracts posted their first weekly gains since late October, driven by risk-on sentiment in financial markets after Federal Reserve signaled easing monetary conditions next year.

The U.S. dollar rebounded off Thursday's 101.765 four-month low on Friday, strengthening 0.6% to 102.548 following hawkish comments from the President of the New York Federal Reserve John Williams indicating near-term rate cuts are still not up for discussion among central bank officials.

"The rate cut issue is not the main question before the Fed. It's premature to be thinking about a March rate cut," said Wiliams in an interview with CNBC.

Investors slightly pared back odds for a March rate cut but have still priced in a 140-basis-point cut in the federal funds rate for 2024.

The median estimate of Federal Open Market Committee members in the newly released Summary of Economic Projections implies a 75-basis-point rate cut next year -- a sharp pivot from the recent narrative of "higher-for-longer."

On the macroeconomic data front, U.S. industrial production expanded more than expected in November, helped by the end of the United Auto Workers' strike against "Detroit's Big Three." Auto output jumped 7.1%, the Federal Reserve said, while industrial production rose 0.2%.

Atlanta Fed's GDPNow tool upgraded its economic growth projections on Thursday, showing fourth-quarter growth now at 2.6% from 1.2% midweek following the most recent economic data releases. Retail sales posted surprise growth in November, expanding by 0.3% compared to a negative 0.1% in the prior month, underscoring the strength of the American consumer.

In the Eurozone, macroeconomic data paints a less rosy picture, with manufacturing across the 20-country bloc falling into deeper recession and services broadly contracting.

The downturn was led by France, where businesses reported the sharpest reduction in activity since March 2013, due to accelerating rates of contraction in both manufacturing and services. However, output also fell at a sharp and accelerating rate in Germany amid steepening losses for both goods and services.

The manufacturing sector in Germany -- the bloc's largest economy -- remained in recession territory for a sixth successive month in December at 43.1, with 50 separating growth from contraction.

"Once again, the figures paint a disheartening picture as the Eurozone economy fails to display any distinct signs of recovery. On the contrary, it has contracted for six straight months. The likelihood of the Eurozone being in a recession since the third quarter remains notably high," said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.

Despite a rather dismal economic backdrop, the European Central Bank concluded the final policy meeting of the year without any indication of potential rate cuts in 2024. In contrast, ECB President Christine Lagarde struck a hawkish tone when addressing the questions surrounding the easing of monetary conditions.

"We should absolutely not lower our guards ... the reason is the domestic inflation driven by wage costs is not budging," said Lagarde on Thursday.

At settlement, NYMEX WTI futures for January delivery slipped $0.15 per barrel (bbl) to $71.43 per bbl, and the international crude benchmark Brent February futures settled little changed at $76.55 per bbl. NYMEX RBOB January futures gained $0.0182 to $2.1370 per gallon, and NYMEX ULSD January contract advanced $0.00295 to $2.6208 per gallon.

Liubov Georges can be reached at liubov.georges@dtn.com.