On Wednesday, oil prices faced challenges as they declined to their lowest point in more than three months during the previous session. These declines were primarily driven by concerns regarding weakening demand from the United States (U.S.) and China, which are the world’s leading oil consumers.
Read more: Oil prices surge as Saudi, Russia reaffirm output cut
Brent crude futures showed a slight increase of 15 cents, reaching $81.76 per barrel. In contrast, U.S. crude futures experienced a marginal decline of 2 cents, settling at $77.35 per barrel. It is worth noting that both Brent and U.S. crude futures dropped to their lowest levels since July 24 on Tuesday.
According to analysts, the market’s attention has shifted away from concerns over Middle Eastern supply disruptions. Instead, the focus has turned to an improvement in the overall supply-demand balance, particularly in terms of tight oil supply conditions.
Market sources, citing figures from the American Petroleum Institute, revealed on Tuesday that U.S. crude oil stocks witnessed an increase of nearly 12 million barrels last week.
The release of weekly inventory data by the U.S. Energy Information Administration (EIA) will be delayed until the week of November 13.
On Tuesday, the EIA stated that crude oil production in the U.S. for this year will experience a slightly smaller increase than previously anticipated. Simultaneously, it projected a decline in demand.
Reversing its earlier projection of a 100,000 barrels per day (bpd) increase, the EIA now anticipates a decline of 300,000 bpd in total petroleum consumption in the country for this year.
Under the easing of U.S. sanctions, the agency forecasts that Venezuela’s crude oil production will rise by less than 200,000 bpd to reach an average of 900,000 bpd by the end of 2024.
OPEC exports
Analysts at Goldman Sachs, further alleviating concerns over supply tightness, have estimated that seaborne net oil exports from six OPEC countries, which collectively implemented production cuts amounting to 2 million bpd since April 2023, are currently only 0.6 million bpd lower than the levels observed in April.
Doubts arise
Data from China, the largest importer of crude oil globally, has also cast doubts on the demand outlook.
While crude oil imports by the world’s second-largest economy demonstrated strong growth in October, its overall exports of goods and services contracted at a faster rate than anticipated. This development has heightened concerns over reduced global energy demand.
Adding to pressure
Oil prices faced additional pressure due to a slight rebound in the U.S. dollar from its recent lows. This strengthening of the dollar increases the cost of oil for holders of other currencies.
However, on a positive note, the Organization of the Petroleum Exporting Countries anticipates global economic growth to continue, which will drive fuel demand. This outlook remains optimistic despite economic challenges such as high inflation and interest rates.
Extension of cuts
Officials announced on November 5 that Saudi Arabia and Russia will extend their planned voluntary oil supply cuts until the end of 2023. Furthermore, OPEC+ is scheduled to hold discussions on November 26 regarding the market conditions and output quotas.
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