Global Oil Prices Fluctuate Amidst Concerns Over US and China Demand, Fed Policy Shift
Global oil prices experienced fluctuations as concerns about diminishing demand in the United States and China, coupled with uncertainties from the US Federal Reserve, influenced market dynamics. Despite a 2% increase on Friday due to Iraq's support for OPEC+ oil cuts, the week saw a 4% loss, marking the first three-week losing streak since May. Economic data from China raised fears of reduced demand, impacting Saudi Arabia's supply to refiners. Federal Reserve Chair Jerome Powell's hint at potential interest rate hikes added to market uncertainties. Despite these challenges, top oil exporters Saudi Arabia and Russia confirmed extended voluntary output cuts until year-end, with OPEC+ scheduled to meet on Nov. 26 to address ongoing concerns.
Reuters
LONDON: Oil markets experienced uncertainty on Monday as apprehensions about diminished demand in the United States and China, combined with mixed signals from the US Federal Reserve, impacted global oil prices.
Brent crude futures for January showed a decline of 8 cents at $81.35 a barrel at 0916 GMT, following a $1 drop in earlier trading. Simultaneously, US West Texas Intermediate (WTI) crude futures for December were recorded at $77.11, down by 6 cents.
While oil prices saw a nearly 2% increase on Friday due to Iraq expressing support for OPEC+ oil cuts, the week marked a 4% loss, resulting in a three-week losing streak—the first since May.
Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan Securities, highlighted investor concerns, stating, “Investors are more focused on slow demand in the United States and China, while worries over potential supply disruptions from the Israel-Hamas conflict have somewhat receded.”
The US Energy Information Administration (EIA) reported last week that crude oil production in the United States for this year is expected to rise slightly less than initially anticipated, with a decline in demand. Additionally, per capita US gasoline consumption might hit a two-decade low next year, according to the EIA.
Federal Reserve Chair Jerome Powell's recent comment about the possibility of raising interest rates if progress in curbing inflation stalls added to market uncertainties. Tony Sycamore, a market analyst at IG, noted that more hawkish Fed speak is unwelcome for crude oil, especially with recent data from China and the US reigniting growth fears.
Weak economic data from China, the largest crude oil importer globally, heightened concerns about declining demand, leading refiners to request reduced supply from Saudi Arabia, the world's largest exporter, for December.
In October, China's consumer prices hit pandemic-era lows, raising worries about the country's economic recovery. However, Hiroyuki Kikukawa of NS Trading mentioned that if WTI approaches $75 a barrel, support buying is likely on expectations that Saudi Arabia and Russia would extend their voluntary supply cuts beyond December.
Top oil exporters Saudi Arabia and Russia confirmed last week that they would continue with additional voluntary oil output cuts until the end of the year, acknowledging ongoing concerns about demand and economic growth affecting crude markets. OPEC+ (Organization of the Petroleum Exporting Countries and allies, including Russia) is scheduled to meet on Nov. 26 to discuss further strategies.
