Oil Prices Retreat on Renewed Demand Concerns in the U.S. and China

Oil Prices Retreat on Renewed Demand Concerns in the U.S. and China

On Monday, oil prices retreated, reversing the gains seen on Friday, as revived worries about weakening demand in the United States and China impacted market sentiment.

As of 0400 GMT, Brent crude futures for January were down 71 cents, or 0.87%, trading at $80.72 per barrel. Simultaneously, U.S. West Texas Intermediate (WTI) crude futures for December stood at $76.49, reflecting a decline of 68 cents, or 0.88%.

Both benchmarks remained significantly below their 100-day moving averages, with WTI at $86.61 per barrel and Brent at $82.31 per barrel.

Despite a nearly 2% increase on Friday following Iraq’s endorsement of OPEC+ oil cuts, prices experienced a weekly drop of about 4%, marking the third consecutive weekly decline since May.

Oil Prices Retreat price chart image

Hiroyuki Kikukawa, President of NS Trading, a unit of Nissan Securities, remarked, “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.”

Last week, the U.S. Energy Information Administration (EIA) reduced its expectations for crude oil production in the United States this year and projected a decrease in demand. Additionally, China, the world’s largest crude oil importer, reported weak economic data, raising concerns about a potential decline in demand.

China’s consumer prices hit pandemic-era lows in October, casting doubt on the strength of the country’s economic recovery. Refiners in China also requested less supply from Saudi Arabia, the world’s leading exporter, for December.

Despite the challenges, Kikukawa expressed confidence that oil prices could find support if WTI approaches $75 per barrel. He stated, “If the market falls further, we will likely see support buying on expectations that Saudi Arabia and Russia would decide to continue their voluntary supply cuts after December.”

In a positive development, top oil exporters Saudi Arabia and Russia confirmed last week that they would extend their additional voluntary oil output cuts until the year-end, citing ongoing concerns about demand and economic growth.

Looking ahead, OPEC+ is scheduled to meet on November 26 to discuss further measures.

On the supply side, U.S. energy firms reduced the number of oil rigs for the second consecutive week to the lowest level since January 2022, according to energy services firm Baker Hughes. The rig count is often indicative of future output levels.

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