Oil headed for a weekly decline as rising US inventories and the prospect of further tightening by the Federal Reserve eclipsed the lift from more signs that Chinese demand is improving.

West Texas Intermediate fell toward USD 77 a barrel in Asia, dropping for a fourth day in the longest run of losses this year. The US crude benchmark has declined by more than 3 percent this week, and is lower year-to-date. Data this week showed another build in US inventories, which swelled to the most since 2021.

Traders are factoring in the prospect of far tighter monetary policy as the US central bank seeks to drive down inflation. Two policymakers, Loretta Mester and James Bullard, have signaled they may favor returning to sharper rate hikes. That’s aiding the dollar, which is a headwind for most commodities.

Oil has struggled this year despite China’s re-emergence from Covid Zero and Russia’s plan to cut supply in March in response to sanctions imposed because of the war in Ukraine. The Organization of Petroleum Exporting Countries (OPEC) and its allies have made plain they won’t boost output to offset Moscow’s move.

“The market does seem to be focused on the weakness we are seeing in the US,” said Daniel Hynes, senior commodity strategist at Australia & New Zealand Banking Group Ltd. “Things could change pretty quickly. I suspect we will see a coordinated pickup in demand from both China and the US later in the first quarter or early second quarter — that’s when markets will get excited.”

Oil’s drop came amid a broad retreat in risks assets, with equities lower along with other commodities including copper. A gauge of the dollar rose 0.4 percent.

Despite the softer prices, Brent remains in backwardation, a bullish pattern marked by the front-month contract trading at a premium to the next in sequence. The prompt spread was USD 32 cents a barrel in backwardation compared with USD 20 cents a barrel in contango, the opposite structure, a month ago.