Oil Prices Retreat Amid Demand Concerns in US and China

Crude oil markets experienced a decline in prices at the start of the week as the focus on dwindling demand from leading consumers, the United States and China, overshadowed recent supply-side discussions. The benchmarks for oil saw an inversion from their prior gains, awakening the vigilance of investors and analysts alike.

Subdued Market Reaction To Global Demand Prospects

With January Brent crude futures falling 35 cents or 0.4% to sit at $81.08 a barrel, and December U.S. West Texas Intermediate (WTI) crude futures dropping 35 cents or 0.5% to $76.82, the markets took notice of the changing landscapes. Despite nearly a 2% rise last Friday, bolstered by Iraq's support for production cuts by OPEC+, both oil benchmarks experienced a weekly drop of nearly 4%, marking their third consecutive weekly loss since May.

Analysts Weigh In On Market Movements

"Investors are more focused on slow demand in the United States and China while worries over the potential supply disruptions from the Israel-Hamas conflict have somewhat receded," stated Hiroyuki Kikukawa, NS Trading's president. Adjustments in the U.S. crude production forecast by the U.S. Energy Information Administration (EIA) are also attributing factors, with a reduction expected in production growth and demand for the current year.

The recent Chinese economic downturn, as the predominant importer of crude oil, has stirred up concerns about demand diminishing further, particularly as Chinese refiners signal a decrease in orders for Saudi crude in December.

However, Kikukawa alluded to likely support for oil prices if WTI should near the $75 threshold, with potential buyer engagement anticipating continued supply regulation by OPEC members.

OPEC+ Supply Tactics In Focus

Key oil nations like Saudi Arabia and Russia have confirmed their commitment to maintain voluntary output cuts until year-end amidst persisting demand anxieties and macroeconomic headwinds influencing the oil market. The eyes of many will turn to the forthcoming OPEC+ meeting scheduled for November 26.

The supply outlook was further complicated by data from Baker Hughes BKR.O, revealing a decline in active U.S. oil rigs, reaching a nadir not seen since January 2022, an indication of future output trajectory.

Oil, Demand, Market